By Kim Jae-kyoung
Staff Reporter
Moody's Investors Service has lowered its outlook on the credit rating of Korea Development Bank (KDB), citing the upcoming privatization of the state-run lender.
The global credit rating agency said Wednesday that it had decided to downgrade the outlook on the lender's rating to ``negative'' from the current ``stable.''
The outlook downgrade means that there is high possibility of a rating reduction within the next 12 months.
The agency said that privatization of KDB will make it difficult for the lender to get financial assistance from the government, a key reason for the outlook downgrade.
Market analysts said that it is inevitable that the KDB will face a downgrade in its credit rating in the wake of the privatization.
``The credit rating of KDB has been on par with the government's sovereign rating because in the past the lender could receive emergency assistance from the government,'' Hyundai Securities analyst Koo Kyung-hwe said.
``However, privatization will make it impossible for the bank to receive such assistance, therefore making it more vulnerable to external risks,'' he added.
The government owns the entire stake of KDB, and the related law guarantees the repayment of principals and interests of bonds issued by the bank.
The outlook downgrade is expected to delay the bank's plan to raise medium- and long-term capital abroad.
``We will look into the details of the privatization plan once it comes out,'' Moody's said. ``In particular, our focus will be placed on key factors affecting its credit rating, such as the bank's policy shift and change in the government's ownership.''
The credit rating on long-term foreign currency and the Korean won-denominated bonds issued by the KDB are set at Aa3 and Aa1, respectively.
Analysts predict that following Moody's move, other global credit agencies, such as Standard & Poor's and Fitch, are likely to follow suit sometime soon.