S&P cuts SK Innovation, unit

S&P said it downgraded SK Innovation Co. Ltd., the rating on its debt and its core subsidiary SK Global Chemical Co. Ltd. to BBB from BBB+.

“We downgraded SKI to reflect the company’s weakened credit quality on aggressive financial policies amid a weak operating environment. Given SKI’s operational volatility, we expect the company to continuously invest in electric vehicle (EV) battery capacity over the next few years, leaving the company’s debt level elevated,” said S&P in a press release.

The agency sees the company’s annual capital spending increasing to KRW 2.5 trillion to KRW 3.5 trillion over the next two years from KRW 1.5 trillion last year. S&P also estimates the company’s adjusted debt rising to KRW 7.5 trillion to KRW 8 trillion during this time, from KRW 5.5 trillion in 2018 and KRW 2.9 trillion in 2017.

S&P downgraded SK Global because it sees the company’s credit quality being tied to its parent SKI.

The outlook is stable.

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