Kumho, Hyundai Suffer Under Short-Term Debts
By Kim Tae-gyu
Staff Reporter
Three out of the country's 10 largest conglomerates, dubbed chaebol, have more near-term debts compared to their liquid assets, which means they might face liquidity problems in the not-so-distant future.
The Korea Exchange (KRX) said Monday that Hanjin, Hyundai Heavy Industries and Kumho Asiana groups fell short of 100 percent in the current ratio as of the end of this June.
Otherwise dubbed a liquidity ratio, the current ratio measures a company's ability to reimburse their short-term liabilities with its short-term assets and a ratio below 100 percent shows that it might not be able to pay off its obligations.
For example, Hanjin Group had debts whose maturity is less than a year amounting to 6.8 trillion won. But the amount of its cash or cash equivalents was a mere 4.2 trillion won.
``Companies with the current ratio under the benchmark 100 percent do not necessarily go under because they can raise capital in several ways. But that is obvious bad news,'' a Seoul analyst said.
``In particular, firms are required to keep such a ratio as high as possible during the financial crisis because banks may withdraw their money at any time in emergency,'' he said.
Hanjin Group put up the worst ratio of 62.2 percent, chased by Hyundai Heavy with 79.6 percent and Kumho Asiana with 82.51 percent.
In comparison, POSCO Group posted of the highest current ratio at 402.3 percent, followed by Samsung Group with 129.6 percent and GS Group with 128.6 percent.
Overall, the 10 chaebol averaged a current ratio of 112.5 percent, down by 5.6 percentage points from a year before.
Hanjin and Kumho have struggled over the past year amid the unprecedented economic turmoil as their flagship businesses of airlines suffered setbacks due to the reduced number of tourists.
When contacted, Hyundai Heavy said the world's largest shipbuilder is penalized due to ``controversial'' accounting principles.
``Deposits from ship buyers are regarded as short-term debts although they are practically advance payments of vessel prices,'' a Hyundai Heavy spokesman said.
``Accordingly, our short-term debts are inflated. Excluding the deposits, however, our short-term obligations would more than halve and the current ratio would be well above 100 percent,'' he said.
Chaebol refers to Korea's sprawling conglomerates in which founding families exercise almost unchecked control despite small direct shareholdings.
For instance, Samsung is the country's biggest chaebol with such iconic affiliates as Samsung Electronics and Samsung SDI under its arms.