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[Alpha Biz=(Chicago) Reporter Paul Lee] he Korea Investors Service said on the 27th that the credit burden increased as GS E&C suffered massive losses in the second quarter due to expenses related to the full reconstruction of the Geomdan apartment in Incheon, which caused the collapse of an underground parking lot.
On the previous day, GS Engineering & Construction announced that its operating loss in the second quarter was 413.9 billion won, which was tentatively estimated to have shifted to a deficit compared to the same period last year (164.4 billion won in operating profit).
GS E&C posted an operating loss on a quarterly basis for the first time since the first quarter of 2014, and it is the result of a temporary reflection of the settlement loss of 552.4 billion won due to the full reconstruction of the Geomdan New Town apartment in Incheon.
"Reconstruction costs amounting to 552.4 billion won are similar to GS E&C's annual operating profit," the Korea Investors Service said in a related report. "Considering the burden of all construction costs, low business performance is expected at the level of annual operating loss or break-even point this year."
"After the collapse, negative perception of brand awareness and construction capacity will be inevitable," he said. "A prolonged impact can lead to damage in order competitiveness or a decrease in order balance."
In addition, he added, "The impact on business stability could increase depending on the results of the survey and the disposal of the Ministry of Land, Infrastructure and Transport, which is scheduled to be announced in mid-August."
The Korea Investors Service plans to check direct losses related to full-scale reconstruction, as well as fundamental changes in its business base, including order competitiveness, and the status of refinancing of project financing (PF)-backed securities and corporate bonds, and reflect them in GS E&C's credit rating.
AlphaBIZ 폴 리(hoondork1977@alphabiz.co.kr)
