S&P: Korail on negative watch

Standard & Poor's said it placed an A+ long-term corporate credit rating on Korea Railroad Corp. (Korail) on CreditWatch with negative implications, along with the A+ rating on its senior unsecured notes.

The stand-alone credit profile for Korail remains BB-.

The CreditWatch placement follows the default of Dream Hub, the project finance vehicle for Yongsan, a large real estate development project in which Korail owns a 25% stake, S&P said.

On March 13, Dream Hub missed an interest payment of KRW 5.9 billion on asset-backed commercial paper that it had sold to public investors, the agency said.

The default of Dream Hub will trigger an unwinding of the original land sale agreement between Dream Hub and Korail. This means that Korail will need to return about KRW 2.4 trillion of a part of the land sale proceeds and may have to make an impairment charge on outstanding receivables related to the land sale as land prices have depreciated, S&P said.

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