South Korean shipbuilding companies have been struggling to make interest payments on their outstanding debt since 2013 due to a years long recession in the global market, a central bank report showed Thursday.
The interest coverage rate, which measures the ability of a company to meet interest expenses, has been below the benchmark 100 percent line since 2013, according to the Financial Stability Report by the Bank of Korea (BOK).
It was 2,128 percent in 2008 just before the global financial crisis but sharply dropped to the below-zero territory in 2013, bottoming at minus 604 in 2015.
If a company has an interest coverage rate of 100 percent or lower, it is unable to pay its debt using its earnings.
Hit by low oil prices and a supply glut, South Korea’s shipbuilders have been suffering heavy debts and declining orders for years.
Creditors threw a multibillion-dollar lifeline to rescue Daewoo Shipbuilding & Marine Engineering Co. last year, one of the leading shipyards in the world.
Local shipbuilders led by industry leader Hyundai Heavy Industries Co. have been going through a range of restructuring steps, including massive layoffs in past years.
Thanks to the restructuring efforts, their interest coverage rate stood at 55 in 2017 but still remained below the 100 level.
The latest data, meanwhile, showed local food and accommodation businesses have generally maintained a coverage rate below 200 percent since 2008, although numbers did fall to 98 in 2017.
Transportation companies have also hovered around the 200 percent line since 2014, after having lingered in the 70 percent area between 2011 and 2013.
For the 22,798 companies operating in South Korea, their interest coverage rate reached 630 percent in 2017, up from 321 percent in 2008.