Moody's: Posco unchanged

Moody's Investors Service said that Posco's enlarged investment plan has no immediate impact on its A1 rating or negative outlook, but a materialization of its mergers-and-acquisitions strategy could pressure the rating.

Posco recently announced that it will increase its unconsolidated investments to about KRW 6.3 trillion in 2010 from KRW 4.9 trillion in 2009, excluding potential acquisition activities. The agency said this increase will have a fairly limited impact on the company's financial leverage because the negative free cash flow arising from such investments will largely be cash-funded.

However, Posco has set side KRW 3 trillion for acquisitions in non-steel business. Moody's said the ratings could come under immediate pressure if such acquisitions materialize because the sheer size of these aggregate investments would exceed Posco's current financial cushion at the A1 rating level.

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