This file photo shows the buildings of South Korea’s major companies in Seoul. (Yonhap)
SEOUL, Nov. 30 (Korea Bizwire) — Large South Korean companies saw their third-quarter borrowing costs jump more than 40 percent from a year earlier due to rising interest rates, a corporate tracker said Wednesday.
The combined interest cost of 268 out of the country’s top 500 firms by sales came to 6.2 trillion won (US$4.7 billion) in the July-September period, up 42.1 percent from a year earlier, according to CEO Score.
A total of 13 corporations, including the state-run Korea Electric Power Corp. (KEPCO), paid more than 100 billion won in interest in the three-month period.
KEPCO chalked up the highest borrowing cost of 722.3 billion won, followed by the state-run Korea Gas Corp. with 239.9 billion won and global tech giant Samsung Electronics Co. with 216.5 billion won.
Nearly 88 percent of the total big businesses, or 236, saw their interest costs increase in the third quarter from a year earlier.
The jump in their borrowing costs comes as South Korea’s central bank has remained hawkish in an effort to curb persistently high inflation.
Since August last year, the Bank of Korea has conducted six rate hikes with the country’s benchmark interest rate reaching 3.25 percent.
In contrast to escalating borrowing costs, those firms’ operating income sank nearly 30 percent on-year to 34.7 trillion won in the third quarter.
Their interest coverage ratio fell to 5.6 for the July-September quarter, down from 11.4 a year earlier.
The interest coverage ratio is obtained by dividing a company’s operating profit by its interest expenses. A reading below 1 means the company’s operating profit cannot cover its interest expenses.
Forty firms had a reading of less than 1 in the third quarter, up five from a year earlier, with 77 companies reporting improved ratios, according to CEO Score.
(Yonhap)
