Moody's rates Korea Highway notes A3

Moody's Investors Service assigned an A3 rating with a negative outlook to Korea Highway Corp.'s proposed $500 million senior unsecured notes due 2014. The negative outlook reflects the negative outlook for the Korean Government's A3 foreign currency rating.

The rating recognizes Korea Highway's important role in constructing and operating the expressway network in Korea, the sustainable support expected from the Korean Government to keep Korea Highway's operating performance and financial conditions sound, and the expected continued growth in expressway traffic in Korea, Moody's said.

The rating also considers Korea Highway's substantial funding needs for expressway construction and refinancing, which will result in an increase in its total debt over the intermediate term.

Moody's said it believes that the government has a strong desire to maintain Korea Highway's financial position at least at the current level.

In the meantime, Korea Highway will need substantial funds to continue to invest in new route construction and in expanding some existing expressways. Investments will therefore be recovered only slowly, and KHC will continuously need debt financing to fund a portion of construction costs and also to refinance portions of maturing debt, Moody's added. The long recovery period also results in modest cash flow and interest coverage measurements. Lower-than-expected growth of traffic volume or constraints on future toll increases could lead to recovery periods being even longer.

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