More than 1 in 10 S. Korean companies remain marginal in 2018: BOK

Published : Oct 8, 2019 - 10:10 Updated : Oct 8, 2019 - 10:10

The number of companies unable to service their debts with earnings rose from a year earlier in 2018, posing a threat to the country's financial and economic stability, central bank data showed Tuesday.

According to a report submitted by the Bank of Korea for parliamentary audit, the number of the so-called marginal companies came to 3,236 last year, up from 3,112 a year earlier.

The number represents 14.2 percent of 22,869 companies here that are subject to external audit.

(Yonhap)

Marginal firms refer to companies whose interest coverage ratio has remained at below 1 for more than three years. The interest coverage ratio is calculated by dividing a company's operating profit by its interest expenses. A ratio of less than 1 means the company's operating profit does not cover its interest expenses.

The 2018 tally also marks a three-year high that came after two consecutive years of drop from 3,278 in 2015 to 3,216 in 2016 and 3,112 the following year.

The rise in the number of marginal firms may lead to greater downside risks, especially under financial turmoil.

The BOK earlier said the amount of loans extended to marginal firms came to 107.9 trillion won ($90.1 billion) as of end-2018, accounting for 13.8 percent of all corporate loans.

In 2018, the number of large companies with an interest coverage ratio of less than 1 came to 434, up from 382 a year before. The number of small and medium-sized firms with marginal earnings also grew from 2,730 to 2,802 over the cited period. (Yonhap)