NEW YORK-Moody’s Investors Service Inc. confirmed the speculative grade rating of Ba1 on $1.8 billion in outstanding debt of Samsung Electronics Co. Ltd., including Samsung Electronics America Inc. and other subsidiaries guaranteed by the parent company.
However, the New York rating agency also said it was reviewing for possible downgrade the Ba1 rating on $400 million in debt of Hyundai Semiconductor America Inc., which is building a $1.4 billion semiconductor fabrication line in Eugene, Ore. The plant was scheduled to begin commercial production April 1, but the start date has been postponed, perhaps until June.
Hyundai Semiconductor America is 76-percent owned by HEI of Seoul, South Korea, a major company within the Hyundai chaebol. One of the largest manufacturers of semiconductors and other electronic devices in the Republic of Korea, HEI had revenues of $2.5 billion in 1997.
Samsung Electronics Co., whose core business is memory-type semiconductors, reported revenues of about $13 billion last year. Due to “a precarious overcapacity situation,” its main product remains “under severe price pressure,” Moody’s said.
“While consumer electronics demand (in South Korea) [has been] mature for some time already, the fast growth in telephone equipment and terminals, particularly for cellular telephony, has abated drastically as a result of sagging consumer confidence and rising unemployment,” said Alfred J. Pastore, managing director, and Wolfgang Draack, senior vice president, of Moody’s corporate finance group.
The analysts said they believe Samsung is well positioned to compensate for weak domestic demand through exports. However, they noted that the international consumer electronics market already is very competitive and will become more so with the “expected export offensive” of Southeast Asian suppliers.
Like other Korean chaebols, Samsung may restructure, including divesting its non-core businesses, in order to respond to political and shareholder pressure and Korea’s “tight financial situation,” added Pastore and Draack.
