S&P confirms SK, off watch

Standard & Poor's confirmed SK Corp. including its corporate credit at BB+, removed the ratings from CreditWatch negative and assigned a negative outlook.

The ratings were originally put on watch on March 13 following the revelation of accounting fraud at SK Networks Co.

S&P said its confirmation follows the finalization of the terms of a creditor-led workout program for SK Networks, which removes immediate concerns over SK Corp.'s access to financing.

Following a KRW850 billion debt-for-equity swap, SK Networks is now an approximately 50% owned consolidated subsidiary of SK Corp.

While the rating is supported by SK Corp.'s strong position in the oligopolistic Korean oil refinery and marketing business, it is also weighed down by the company's central role in the SK Networks bailout, S&P added.

SK Corp. has experienced a marked deterioration in its financial profile stemming from about KRW2 trillion in accounting irregularities at SK Global earlier this year. As a result, SK Corp. is expected to post over KRW500 billion in net losses in fiscal 2003 ending Dec. 31, 2003.

The negative outlook reflects uncertainties over the business direction and financial policies of SK Corp., particularly with regard to supporting subsidiary and affiliate companies. The absence of meaningful measures to address the perception of mediocre corporate governance could also result in weakened financial flexibility over time and again raise the possibility of heightened liquidity risk, S&P added.

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