POSCO E&C faces credit rating downgrade risk after fatal accidents
New POSCO E&C CEO Song Chi-young, left, speaks with Rep. Min Byoung-dug of the ruling Democratic Party of Korea at an expressway construction site in Gwangmyeong, Gyeonggi Province, Wednesday. A Myanmar national in his 30s was critically injured in a suspected electrocution accident at the site two days earlier. Newsis
A series of worker fatalities this year has heightened reputational risks for POSCO E&C, sparking concerns over its credit rating and its ability to secure funding, industry officials said Sunday.
Two of Korea's three major credit agencies have issued reports as of Sunday expressing concern over the company’s credit standing.
The warnings follow a series of serious industrial accidents at POSCO E&C worksites this year, in which four workers were killed and one was critically injured. The latest occurred on Aug. 4, when a worker lost consciousness from electrocution while on the job.
The Ministry of Land, Infrastructure and Transport has launched a full-scale probe of the company's construction sites after President Lee Jae Myung called for a thorough investigation and the identification of all legally permissible punitive measures, including revoking the company's construction license.
Korea Investors Service wrote that sustained negative perceptions of the brand’s credibility could ultimately erode its fundamental business strength if combined with potential disruptions to new contract activity and a drop in order volume.
This could be especially critical as POSCO E&C relies heavily on domestic construction business, as its overseas order pipeline has weakened, according to Korea Investors Service.
POSCO E&C currently holds an A+ credit rating with a "stable" outlook from all three major domestic rating agencies, as the latest incidents have not led to an immediate downgrade.
However, precedent suggests caution. HDC Hyundai Development Company and GS Engineering & Construction saw their ratings cut from A+ to A in 2022 and 2023, respectively, following collapses at their apartment construction sites.
The situation is likely to hamper POSCO E&C's fundraising in the future. A potential credit rating downgrade would increase the cost of issuing corporate bonds.
Trading in POSCO E&C bonds on the over-the-counter market has already cooled. According to Yonhap Infomax, there has not been a single trade worth over 1 billion won ($718,648) since July 3.
Shares of POSCO Holdings, POSCO E&C's largest shareholder, have also slid about 6.6 percent, falling from 316,500 won at the close on July 29 — when Lee first publicly criticized the company during a Cabinet meeting — to 295,500 won on Friday.
“With order intake in the second half remaining uncertain, portfolio restructuring and risk management will be key priorities for the company’s management,” an industry official said.