Moody’s warns of rating downgrade for KCC after spinoff plan

2019.07.17 13:48:06 | 2019.07.17 16:21:36

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Moody’s Investors Service on Wednesday was skeptical of Korea’s building and industrial materials company KCC Corp. and its reorganization plan, warning it could downgrade its debt rating below the investment level of Baa3.

Moody’s pointed to deterioration in profitability, increasing financial burden from the planned spin-off of its glass and other consumer goods businesses.

KCC’s earnings before interest, taxes, depreciation, and amortization (EBITDA) will decline by 10 to 15 percent, but debts will not, it warned. The demerger will break the balance in its portfolio and raise the ratio of the silicone business in the hotly contested market to 55 to 60 percent.

KCC last week announced the plan to divest the glass making, interior decoration and flooring material businesses to focus more on its business-to-business sectors like silicone, coating materials and chemicals. The shareholders’ meeting for the plan is due on October 1, and KCC and the spin-off entity, tentatively named KCG, will go relisted on the bourse in January next year.

In May, KCC finished the $3 billion acquisition of the world’s second largest silicone maker Momentive Performance Materials Inc., adding a key material base for the home country to drive its future growth.

KCC shares on Wednesday fell 2.82 percent to close at 258,000 won ($218.46) in Seoul trading.

By Chung Seok-hwan and Lee Ha-yeon

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