NEW YORK–Citing “recent corporate governance problems and alleged accounting fraud within the SK Group,” Moody’s Investors Service has downgraded to stable from positive its outlook on the speculative-grade Baa1 rating of SK Telecom Co. Ltd., the leading wireless telecommunications carrier in South Korea.
In conjunction with these allegations, the “indictment of certain officials, including SKT’s chairman and another director, raises concerns over the strength of the corporate governance regime within the SK Group,” said Brian Cahill and Charles Macgregor, executives of Moody’s corporate finance group who are based in Sydney, Australia.
“The release of audited financial statements for the 2002 financial year may provide guidance as to the effectiveness of SKT’s accounting regime. Further evidence of a separation of ties with the SK Group, specifically common directors and stock holdings, may also contribute to creating a more robust corporate governance environment.”
Notwithstanding these concerns, the rating analysts said they believe that SKT’s “large free cash flow generated from operations, when combined with cash on hand” affords the carrier with a “healthy ability” to repay debt that matures this year, in addition to planned share buybacks.
