이 기사는 2022년 01월 24일 08시05분 thebell에 표출된 기사입니다

HDC Group’s affiliates are at risk of a credit rating downgrade after another fatal accident occurred in Gwangju at one of HDC Hyundai Development Company’s construction sites in less than a year.

Credit ratings of HDC Group’s affiliates are expected to be downgraded, industry sources said on Thursday.

“Rating committee members are sharing opinions,” said an official at a credit rating agency. “We will come to a conclusion after comprehensively reviewing the size of losses, brand image, and whether the company would win orders in the future.”

The second awful accident occurred on January 11 as the exterior walls of a high-rise apartment building under construction crumbled in Gwangju, after a five-story building in the city collapsed on a bus and killed nine passengers in the same city in June 2021.

As a safety issue has a big impact on a builder’s brand image, HDC Hyundai Development Company has come under growing pressure after the accidents. The company’s corporate bond has a credit rating of A+ with stable outlook while its commercial paper has a rating of A2+.

The Dong-gu Office in Gwangju has recently requested the Seoul metropolitan government to order an 8-month business suspension for HDC Hyundai Development Company. With the suspension order, the company’s credit rating is highly likely to be downgraded during the regular rating adjustments in the first half.

The company’s initial plan to sell about 23,000 households this year is highly likely to be postponed until the latest disaster is solved.

The accident is estimated to cause a 1 trillion won ($839 million) loss, including compensation for moving day delays, additional financial costs, and indirect costs, in addition to damage repair and restoration costs.

The possible credit rating is expected to put increased financial pressure on the builder amid the burden of early repayment of loans such as project financing (PF). HDC Hyundai Development Company has raised a considerable amount of money through project financing, using securitization schemes such as asset-backed commercial paper (ABCP) due to the nature of its business structure.

The company had 2.4 trillion won worth of project financing loans in the third quarter of last year alone. Some project financing loans have to be repaid when a credit rating of the builder falls below A- for corporate bonds and A2- for commercial papers.

HDC Group’s affiliates can seriously be affected by HDC Hyundai Development Company’s damaged public image after the building collapse. HDC Holdings, the group's holding company, owns 48.3% of HDC Hyundai EP, 95.2% of HDC I&Cons, and 40% of HDC Hyundai Development Company. (Reporting by Chan-mi Oh)