Over 2 in 10 S. Korean firms unlikely to service their debts

More than two in every 10 South Korean listed companies are unlikely to service their debts with earnings this year due to the fallout from the coronavirus pandemic, South Korea's central bank said Thursday.

The Bank of Korea estimated that 21.4 percent of the listed companies will have an interest coverage ratio below 1 this year.

Last year, the proportion of marginal companies hit a record high of 14.8 percent since the central bank began compiling related data in 2010.

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 BOK said its gloomy outlook is based on worsening corporate financial conditions due to the shocks caused by the COVID-19 pandemic.

The central bank estimated in June that sales of the companies could plunge 10.5 percent on average due to the pandemic.

On Thursday, the BOK said loans extended to marginal companies could amount to 175.6 trillion won ($150 billion).

The BOK said financial companies need to gradually strengthen risk management for corporate lending. (Yonhap)