Firms in rush to secure cash for prolonged downturn

Korea's major companies are rushing to sell their assets to weather the expected fallout from a prolonged economic downturn, finance new projects and simply acquire more cash, industry sources said Tuesday.

Sources said large business such as POSCO, KCC Corp. and Woongjin Holdings Co. have recently taken steps to shed their respective holdings in order to stockpile cash.

Last week, POSCO, South Korea's largest steelmaker, said it may sell property assets held by some of its units, shed stakes or seek their separate listings of these companies to improve its finances.

Woongjin Holdings Co., the holding firm of Woongjin Group, is also seeking to sell its stake in Woongjin Coway Co., Korea's biggest maker of water purifiers, to support its solar business and boost the group's overall financial health.

Last month, KCC Corp., a South Korean construction materials maker, secured 697 billion won ($622 million) by selling its stake in Hyundai Heavy Industries Co., the world's largest shipbuilder.

KCC also secured a combined 877 billion won last year by unloading its stakes in Mando Corp. and Hyundai Motor Co.

Earlier, KCC announced that it plans to buy a stake worth 774 billion in Samsung Group's unlisted amusement park operator Samsung Everland Inc.

"Some companies are hoarding cash as they prepare for a global economic downturn, or just improve their financial status," said an industry source. "They are opting to save rather than spend."

Analysts said securing ample cash ammunition is important for companies in times of economic uncertainties, which will help them raise capital at low costs on the back of their improved financial footing. Or they can spend the money for aggressive investment and mergers when the economy gains steam.

An earlier report showed that bond sales and borrowing by the country's large firms hit an all-time high last year as they scurried to secure liquidity to brace for a worsening eurozone debt crisis and to repay maturing debts.

South Korea's top 39 companies sold a combined 43.2 trillion won in bonds in the first 11 months of last year, higher than the 35.1 trillion won floated the previous year in total, according to data by FnGuide, a financial information provider.

The latest data marked the highest level since a record 41.4 trillion won in debt sales tallied in 2009.

Banks' lending to large firms reached 111.8 trillion won as of the end of October, up 24.5 trillion won from the end of 2010, according to the data.

A rise in corporate debt sales and borrowing came as the global slowdown and Europe's debt crisis increase economic uncertainty, experts said.

The global downturn will inevitably hit corporate bottom lines as exports account for about 50 percent of the South Korean economy.

A bulk of corporate bonds, which were sold right after the 2008 global financial crisis, mature in the first half of this year, prompting more local firms to make efforts to secure liquidity, experts say. In the first half of next year, corporate bonds worth 24.5 trillion won will mature. (Yonhap)