Moody's may downgrade Posco

Moody's Investors Service said it placed Posco Engineering & Construction Co., Ltd.'s Baa2 issuer rating on review for possible downgrade.

The action is in response to the company's disclosure that it took over KRW 346.5 billion of debt from a property developer, for which Posco had provided a de facto payment guarantee, Moody's said.

While the debt takeover will have an adverse impact on Posco's financial profile, it also raises concerns over its ability to manage housing project-related risks and the quality of payment guarantees for property developers, the agency added.

The large chunk of the debt takeover has been funded with Posco's internal cash, hence the impact on its gross debt-related credit ratios will be moderate, Moody's said.

Nonetheless, given that the company's current financial leverage provides little leeway for the Ba1 standalone rating, Moody's said it see a heightened likelihood that its overall financial profile will remain weak for the ratings over an extended period.

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