POSCO is likely to abandon its bid to acquire Dongbu Incheon Steel and Dongbu Dangjin Plant ― two facilities belonging to the troubled Dongbu Group ― following the unexpected downgrade of its credit rating last week by local assessment agencies.

According to POSCO officials, chairman Kwon Oh-joon and other top executives reviewed the package deal on Monday morning but made no final decision on the bid.

“The chairman has put his priority on improving the company’s financial structure. The management may have felt pressure in pushing ahead with the Dongbu deal and spending massive amounts of cash on it,” said a company official on condition of anonymity.

Since Dongbu announced its restructuring plan in November, POSCO has been widely expected to take over the group’s steel mill and power plant in a package deal. The company also completed its due diligence on the two facilities in May.

The bidding price may be a key reason for POSCO’s possible withdrawal. The Korea Development Bank, Dongbu’s main creditor, had allegedly proposed some 700 billion won ($680 million) for the package deal, but POSCO instead offered about 500 billion won.

But industry watchers said that the price was not the only factor.

Global rating agencies such as Moody’s, Standard & Poors and Fitch have issued downgrades on POSCO since 2011, but the recent cut from homegrown agencies had been widely unexpected and drove home the point to the world’s fifth-largest steelmaker and its new chairman.

On June 11, Korea Investors Services lowered POSCO’s credit rating from “AAA” to “AA+.” It was the first time for the nation’s top rating agency to downgrade the company over the past two decades.

Two other rating services ― Korea Ratings and Nice Investors Service ― also lowered the company’s rating from “stable” to “negative” on June 13, forecasting a negative outlook for the company’s future performance.

Adding to market concerns surrounding the Dongbu deal, POSCO Energy was recently named a preferred bidder for Tong Yang Power with a bidding price of 400 billion won.

By Lee Ji-yoon (jylee@heraldcorp.com)