Moody's Investors Service has downgraded Hyundai Steel Company's issuer rating to Baa3 from Baa2. The rating outlook remains negative. Moody's Analyst Sean Hwang said "The downgrade reflects our expectation that Hyundai Steel's earnings and financial leverage will remain materially weaker over the next 1-2 years after already weakening significantly through 2019," says. In particular, we expect a significant negative impact from the coronavirus outbreak on global and regional steel demand, which in turn will erode Hyundai Steel's profitability and hinder its ability to reduce debt.”
The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The steel sector has been affected by the shock given its exposure to cyclical end-markets such as the auto sector, which are vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its environmental, social and governance framework, given the substantial implications for public health and safety.
Hyundai Steel was already weakly positioned in the Baa2 rating category prior to the coronavirus outbreak, with limited headroom in its rating to weather additional challenges on top of an already weak sector environment.
Moody's expects Hyundai Steel's annual EBITDA to slump further over the next 12-18 months from the KRW2.0 trillion recorded in 2019, and remain materially weaker than the approximate KRW3 trillion recorded in 2016-18.
Source: STEELGURU
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