S. Korean firms' financial health worsens amid credit squeeze

SEOUL, Nov. 24 (Yonhap) -- South Korean companies are facing growing cash
shortages amid a credit crunch, with their financial burdens increasing sharply,
industry sources said Monday.

An index measuring large companies' cash flows plunged to 75 in October, the
lowest level since January 2003, reflecting the difficulties local companies face
in raising funds and their severe cash shortages, according to data released by
the Bank of Korea.
On top of that, their debt burdens have also worsened. According to on-line
business data provider Chaebol.com, the combined borrowings of 164 companies
affiliated with the country's top 30 groups reached 49.63 trillion won (US$33
billion) as of the end of September, a sharp increase of 58.7 percent from a year
ago.
Consequently, the average debt-to-equity ratio of the nation's top 30 business
groups rose 18.8 percentage points to 108.5 over the cited period, it said.
"In times of economic recession, companies' financial burdens increase sharply,
which in turn means that they need massive restructuring efforts to tide over the
downturn," an official at the company.
For one, Samsung Group, the country's top conglomerate, saw its short-term
borrowing more than triple over the cited period. Short-term borrowing at SK, the
nation's No.3 business group, also more than doubled.
"Companies which took over rivals with borrowed money are facing more serious
problems," said Bae Sang-keun, a researcher at the Korea Economic Research
Institute.
Short-term borrowing at Hanwha, the country's 10th-largest group which was picked
as a preferred bidder last month to buy Daewoo Shipbuilding & Marine Engineering
Co., more than doubled, according to Chaebol.com.
Doosan, whose machinery equipment-producing affiliate bought U.S. rivals for $4.9
billion last year, saw its short-term borrowing increase over 55 percent,
according to Chaebol.com.
sam@yna.co.kr
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