[Alpha Biz= Kim Jisun] SEOUL – Korea’s three major credit rating agencies warned on July 31 that SK Enmove’s outstanding bonds face negative implications after the company’s planned merger with the lower-rated SK On.
On July 30, SK On and SK Enmove announced board approval for a merger, effective November 1, under which SK On will absorb SK Enmove.
Korea Ratings (KR) placed SK Enmove’s unsecured bonds and commercial paper on downgrade watch. The bonds are currently rated ‘AA/Stable’ and commercial paper ‘A1’. KR stated:
“The review reflects SK On’s credit standing, as it will be the surviving entity. After the merger, SK Enmove’s ratings will be withdrawn, and the absorbed bonds will be re-rated based on SK On’s credit profile.”
SK On’s unsecured bonds and CP are rated ‘A+/Stable’ and ‘A2+’, respectively.
NICE Ratings also flagged the merger as “negative for SK Enmove’s existing bondholders” and placed the bonds under downgrade watch, noting:
“SK On’s credit rating (‘A+/Stable’) is lower than SK Enmove’s (‘AA/Stable’), and the merged entity’s rating will likely be lower than SK Enmove’s current level.”
Korea Investors Service (KIS) revised SK Enmove’s bond and CP ratings from ‘AA/Stable’ and ‘A1’ to ‘AA/Under Negative Review’ and ‘A1/Under Negative Review’, respectively.
Analysts say the merger could weigh on the credit quality of SK Enmove’s outstanding debt until the merged entity’s new credit rating is finalized.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
