Fitch Affirms Doosan Heavy's USD500 Million Guaranteed Notes at 'AA-'

Doosan Enerbility Co

25/03/2019 06:32

(The following statement was released by the rating agency)


Fitch Ratings-Hong Kong/Tokyo-March 25: Fitch Ratings has affirmed the rating on 
South Korea-based Doosan Heavy Industries & Construction Co., Ltd.'s (Doosan 
Heavy) USD500 million 2.125% guaranteed notes due 2020 at 'AA-'.

The rating reflects the credit enhancement provided to investors by the 
unconditional and irrevocable guarantee from The Export-Import Bank of Korea 
(KEXIM; AA-/Stable).

KEY RATING DRIVERS

KEXIM as Guarantor: The notes are rated at the same level as KEXIM's Long-Term 
Issuer Default Rating (IDR) as its guarantee makes the notes the bank's direct, 
general, unsubordinated and unconditional obligations, and they rank at least 
pari passu with all other present and future unsubordinated and unsecured 
obligations of KEXIM.

Doosan Heavy's Credit Not Considered: Doosan Heavy's standalone credit strength 
is not a consideration in the instrument rating as the guarantee remains in 
force even if Doosan Heavy is declared bankrupt.

DERIVATION SUMMARY

The ratings on the credit-enhanced bonds are based solely on KEXIM's guarantee.

KEY ASSUMPTIONS

Not applicable.

RATING SENSITIVITIES

Since the rating on the credit-enhanced bonds is based solely on KEXIM's 
guarantee, any change in Fitch's assessment of the bank will result in an 
equivalent change in the rating of the bond.

For the ratings on KEXIM, the following sensitivities were outlined by Fitch in 
its update of 25 June 2018:

IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR DEBT

KEXIM's IDRs, Support Rating, Support Rating Floor and senior debt ratings are 
sensitive to a change in Fitch's assumptions about the bank's relationship with 
the South Korean government and the sovereign's rating. They would be directly 
affected by changes to South Korea's ratings or to the solvency guarantee under 
the policy bank's establishment acts. Fitch does not expect any significant 
changes to either in the near to medium term.

LIQUIDITY

Weak Balance Sheet: Doosan Heavy is highly leveraged, making its capital 
structure vulnerable to external shocks. The company had KRW 2,075 billion in 
cash and cash equivalents and KRW10,825 billion in debt as of 31 December 2018.

Contact: 

Primary Analyst

Tyran Kam

Director

+852 2263 9909

Fitch (Hong Kong) Limited

19/F Man Yee Building 68 Des Voeux Road Central 

Hong Kong

Secondary Analyst

Jeong Min Pak

Senior Director

+822 3278 8360

Committee Chairperson

Yee Man Chin

Senior Director

+852 2263 9696

Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: 
wailun.wan@thefitchgroup.com.

Additional information is available on www.fitchratings.com

Applicable Criteria 

Corporate Hybrids Treatment and Notching Criteria (pub. 09 Nov 2018)

https://www.fitchratings.com/site/re/10051058

Corporate Rating Criteria (pub. 19 Feb 2019)

https://www.fitchratings.com/site/re/10062582

Sector Navigators (pub. 23 Mar 2018)

https://www.fitchratings.com/site/re/10023790

Additional Disclosures 

Dodd-Frank Rating Information Disclosure Form 

https://www.fitchratings.com/site/dodd-frank-disclosure/10067041

Solicitation Status 

https://www.fitchratings.com/site/pr/10067041#solicitation

Endorsement Policy 

https://www.fitchratings.com/regulatory

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