S&P puts Samchully on watch

Standard & Poor's said it placed the A- rating on Samchully Co. Ltd. on CreditWatch with negative implications after it became the largest shareholder, at 50%, of S-Power.

S-Power is owned by Samchully, Korea South East Power Co. Ltd. (A/stable) and Posco Engineering & Construction Co. Ltd. (BBB/negative) and will construct and operate an 800-megawatt LNG power plant in Korea, according to the agency.

Samchully's expansion into that business is likely to weaken its financial risk profile because the company's debt is likely to spike given its majority ownership in S-Power and because its capital spending will be primarily debt funded over the next three years, the agency noted.

The agency said it could lower the rating on Samchully if the company's financial ratios deteriorate to the extent that its debt to EBITDA rises above 3x on a sustained basis or weakens its liquidity significantly.

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