Moody's Downgrades SK Hynix Rating Outlook from 'Stable' to 'Negative'

Global credit rating agency Moody's has downgraded SK Hynix's rating outlook from 'stable' to 'negative'. The corporate credit rating was maintained at Baa2.

On the 29th, Moody's stated in a related report, "Amid an unprecedented downturn in the global memory semiconductor industry, SK Hynix is expected to bear a much higher level of debt this year than initially anticipated."

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According to Moody's, SK Hynix's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for this year is estimated to sharply decline to about 5 trillion KRW compared to 21 trillion KRW last year. The amount of borrowings is expected to increase from 27 trillion KRW at the end of last year to around 33 trillion KRW by the end of this year. Consequently, the debt-to-EBITDA ratio is projected to surge from 1.3 times last year to over 6.0 times this year.

Moody's explained, "SK Hynix's performance is very poor and inventory levels are high, making operating cash flow particularly unstable in the first half of this year," adding, "Considering U.S. government regulations, uncertainty about whether SK Hynix can enhance production capacity in China also influenced the downgrade of the rating outlook."

SK Hynix currently produces DRAM memory semiconductors in Wuxi, China. The Dalian plant also produces 6% of the global NAND flash production volume.

Moody's expects, "SK Hynix will significantly reduce capital expenditures this year and eliminate excess inventory to prevent additional debt," and forecasted, "Considering debt reduction and an improvement in market conditions next year, SK Hynix's debt-to-EBITDA ratio will decrease starting next year."

Additionally, Moody's added, "If SK Hynix succeeds in improving performance and demonstrates a clear commitment to maintaining a sound financial structure through investment and operational cost reductions, the rating outlook could be restored to 'stable.'"