Hong Kong, October 27, 2014 -- Moody's Investors Service has upgraded the ratings of the following
Korean government related issuers (GRIs):
• Korea Water Resources Corporation, issuer and senior unsecured
ratings to Aa3 from A1
• Korea Gas Corporation, issuer and senior unsecured ratings
to Aa3 from A1
• Korea National Oil Corporation, issuer and senior unsecured
ratings to Aa3 from A1
• Korea Land and Housing Corporation, issuer and senior unsecured
ratings to Aa3 from A1
• Korea Railroad Corporation, issuer and senior unsecured ratings
to Aa3 from A1
• Korea Resources Corporation (Kores), issuer and senior unsecured
ratings to Aa3 from A1
• Korea Expressway Corporation, senior unsecured rating to
Aa3 from A1
• Korea District Heating Corporation (KDHC), issuer and senior
unsecured ratings to A1 from A2
In a related rating action, Moody's has also upgraded the
senior unsecured bond rating of Minera y Metalúrgica del Boleo,
S.A.P.I. de C.V. to Aa3 from
A1. The bonds are guaranteed by Kores.
The outlook for all ratings is stable.
RATINGS RATIONALE
"The upgrades reflect Moody's recognition of the Korean government's
(Aa3 stable) strengthening oversight of and commitment to the financial
health of the GRIs," says Mic Kang, a Moody's Vice President
and Senior Analyst.
"This initiative is occurring under the government's mid-to-long-term
plans for the financial management of public institutions, which
indicates its commitment to preventing the GRIs from entering any degree
of financial distress," adds Kang.
The plans are part of an overall initiative to curb excessive rises in
debt at the GRIs and to strengthen their financial profiles over the next
four years.
The government has established a track record of closely managing the
GRIs' financial health since the introduction of the plans in 2012,
and will likely continue to monitor progress at each entity on budgets
and funding on a periodic basis.
"Furthermore, the high likelihood that it will provide timely
support, if and when needed, means that the GRIs' credit
quality will remain closely linked to that of the government, despite
their moderate to weak baseline credit assessments, ranging from
baa2 to b3," says Wan Hee Yoo, a Moody's Vice President
and Senior Analyst.
Such an assumption of very high support is also based on the government's
very low tolerance for disruptions at the GRIs, given their strategic
importance to the economy and strong policy functions, especially
in regard to infrastructure, utilities, energy and real estate.
Moreover, a high level of reputational and contagion risk is evident,
particularly regarding funding access for various Korean issuers and the
sovereign itself, should an important GRI encounter financial or
operating difficulties.
Moody's notes that the one-notch rating differential between
the GRIs and KDHC mainly reflects KDHC's relatively moderate level
of strategic importance to the economy, the central government's
modest level of ownership, and the absence of special legislation
which would indicate very high support for the company.
The stable ratings outlook for the GRIs is in line with that on the government's
rating. It reflects Moody's expectation that the GRIs' strategic
importance to and strong support from the government, if and when
needed, will remain intact over at least the next 2-3 years.
An upgrade of Korea's sovereign rating will likely trigger a review
of the GRIs' ratings.
A downgrade of Korea's sovereign rating will result in a downgrade of
the GRIs' ratings.
In addition, Moody's would review the ratings if there were
significant adverse changes in their relationship with the government
and their policy roles.
The principal methodologies used in rating Korea National Oil Corporation
were Global Independent Exploration and Production Industry published
in December 2011, and Government-Related Issuers: Methodology
Update published in July 2010. The principal methodologies used
in rating Korea Land and Housing Corporation and Korea Resources Corporation
was Government-Related Issuers: Methodology Update published
in July 2010. The principal methodologies used in rating Korea
Gas Corporation and Korea District Heating Corporation were Regulated
Electric and Gas Utilities published in December 2013, and Government-Related
Issuers: Methodology Update published in July 2010. The principal
methodologies used in rating Korea Expressway Corporation were Privately
Managed Toll Roads published in May 2014, and Government-Related
Issuers: Methodology Update published in July 2010. The principal
methodologies used in rating Korea Railroad Corporation were Global Passenger
Railway Companies published in March 2013, and Government-Related
Issuers: Methodology Update published in July 2010. The principal
methodologies used in rating Korea Water Resources Corporation were Global
Regulated Water Utilities published in December 2009, and Government-Related
Issuers: Methodology Update published in July 2010. Please
see the Credit Policy page on www.moodys.com for a copy
of these methodologies.
Korea Water Resources Corporation operates a state-owned water
utility in Korea and is fully owned by the Korean government directly
and indirectly.
As Korea's only fully-integrated natural-gas company,
Korea Gas Corporation (Kogas) holds a near monopoly over the import,
transmission, and wholesale of natural gas in Korea. Kogas
was 55%-owned by the Korean government, directly and
indirectly, as of 30 June 2014.
Established in 1979, Korea National Oil Corporation (KNOC) is a
100% government-owned upstream exploration and production
company. KNOC is engaged in the exploration and development of
oil and gas fields, oil stockpiling for strategic purposes,
and the on-lending of funds from the Special Accounts for Energy
and Resources.
As a 100% state-owned entity, Korea Land and Housing
Corp is charged with implementing land and housing-related policies
in Korea. Its key business areas are: (1) to construct and
supply affordable housing; (2) to develop and supply residential
land, and to develop towns and cities; (3) to develop and supply
industrial complexes; and (4) to manage land bank.
Korea Railroad Corporation (Korail) is responsible for railroad operations
in Korea. It is 100%-owned by the Korean government.
The Korail Act requires the government to inject 100% of the company's
paid-in capital.
Korea Resources Corp is 100% owned by the Korean government.
The company is tasked with implementing national mineral resources-related
policies, in order to promote stability in the country's procurement
of such resources.
Korea Expressway Corporation, as a 99.98% government-owned
company, is mandated with the responsibility to construct,
manage and operate Korea's network of expressways.
Korea District Heating Corporation (KDHC) is the country's largest provider
of urban heating services, with a market share of around 55%
for all district heating customers at end-2013. The government
has a 75% direct and indirect stake in KDHC.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Mic Kang
Vice President - Senior Analyst
Project & Infrastructure Finance
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 upgrades seven Korean corporate GRIs to Aa3; KDHC to A1
