• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Announcement:

Moody's: Daewoo International's asset sale has no impact on POSCO's review

 The document has been translated in other languages

Global Credit Research - 09 Aug 2012

Hong Kong, August 09, 2012 -- Moody's Investors Service says that the announcement on 8 August by Daewoo International Corp (unrated), a 66.6% owned subsidiary of POSCO, that it will sell its non-core investment -- a 24% stake in Kyobo Life Insurance (unrated) -- for KRW1.2 trillion will not change Moody's review for downgrade of POSCO.

At the same time, Moody's believes that the planned sale is a step in the right direction for the purposes of improving its financial position.

"Moody's believes that the transaction is an encouraging move. But the net proceeds of around KRW960 billion, if used to pay down debt, will only reduce POSCO's debt/EBITDA by a marginal 0.13x. This reduction is not enough to improve its financial profile to a level consistent with its A3 rating," says Chris Park, a Moody's Vice President and Senior Credit Officer.

POSCO has raised around KRW2 trillion from its non-debt financing activities to date, including the sales of its stakes in SK Telecom and Hana Bank (KRW583 billion), the conversion of convertible bonds into equity (KRW330 billion), and the sale of a cement manufacturer in China (KRW160 billion) undertaken by Daewoo International.

"Without additional non-debt funding measures and cut-backs in investments, Moody's expects adjusted debt/EBITDA at POSCO to grow to about 4x in 2012 from 3.6x a year earlier, which is significantly weaker than the 3x level commensurate with the A3 rating" adds Park.

POSCO could secure an additional KRW5 trillion -- KRW6 trillion through the sale of other non-core assets and stakes in subsidiaries, as well as through implementing IPOs for unlisted subsidiaries and equity financing.

However, management's preparedness to engage in such actions and how long any window of suitable market conditions stays open both remain uncertain.

Moody's review will primarily focus on progress in its deleveraging initiatives and any changes in its investment strategy to prevent negative free cash flow over the next couple of months.

The principal methodology used in rating POSCO was the Global Steel Industry methodology published in January 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

POSCO is one of the world's largest steel producers, with a dominant market position in Korea. It manufactures a broad range of steel products, including hot-rolled products, plates, wire rods, cold-rolled products, silicon steel sheets and stainless steel products.

Chris Park
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: Daewoo International's asset sale has no impact on POSCO's review
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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