Moody's may lower Korail

Moody's Investors Service said it placed Korea Railroad Corp.'s (Korail) A1 rating on review for downgrade.

The action follows the effective default of the Dream Hub Project Financial Investment Co. on obligations in regard to its borrowings through asset-backed commercial paper and asset-backed securities, Moody's said.

The review reflects a view that the effective default of the Dream Hub Project will pressure Korail's credit profile, given the expected significant erosion of the company's capital base and the deterioration of its funding capacity, said Mic Kang, a Moody's analyst.

The effective default of the project will prompt Korail to write off a large proportion of its already recognized profit of about KRW 6.7 trillion from land sales to the project, the agency said.

The resulting erosion of Korail's capital base will reduce its capacity to issue long-term bonds, Moody's said.

Refinancing risk also will increase because the company's reliance on short-term bank debt and commercial paper will materially rise with the difficulties encountered by the project, the agency added.

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