Banks to rate 10 firms `financially unhealthy`

Creditor banks` assessment of 45 major business groups` fiscal 2008 financial statements show that nine or 10 companies fail to meet the standard of a financially healthy company, the Financial Supervisory Service said yesterday.

The figure has increased from six in February, when the banks conducted an unofficial inspection of the companies` finances.

"The increase shows the companies` year-ending financial results, which have not been reported until February, had been further worsened amid the global financial crisis," a bank official said in a report.

Woori Bank, the main creditor for 17 major business groups including Samsung, LG, Doosan, Hanwha and CJ, is considering giving one or two of them the "financially unhealthy" mark. The Korea Development Bank, the main creditor of 12 major business groups including Kumho Asiana, Hanjin, Dongbu and GM Daewoo, is expected to have four to five companies fall into the category.

Both Shinhan and Hana banks are also said to have one company falling short of the standard, while Korea Exchange Bank, the main creditor of five groups including Hyundai Motor and Hinyx, said that there could be one company falling to meet the norm.



Once categorized as financially unhealthy -- a decision to be finalized next week -- a company will be asked to sign an MOU with its main creditor on the efforts that should be done to improve its financial situation. The annual assessment is based on four criteria: debt ratio, interest coverage ratio, total asset turnover ratio and operating income to sales ratio.

"Debt ratio alone cannot be a reliable criterion because it varies wide depending on industry as well," continued the bank official. "A company with comparatively low debt ratio can also be subjected to the MOU deal if it suffers from liquidity problem," he added.

Financial industry specialists, however, emphasizes that signing the MOU doesn`t mean that the company faces a serious financial problems.

"Companies suffer from liquidity problems for various reasons. Failing to meet the standard doesn`t mean the company will go through a restructuring process or become removed from the market," the Financial Supervisory Service said in a press release yesterday.

By Lee Yong-sung



(danlee@heraldm.com)