This article was published on Aug. 13, 2025, at 4:04 p.m. on the ChosunBiz MoneyMove site.
Attention is focused on whether a downgrade in credit rating will occur for POSCO E&C, following a series of industrial accident incidents. With President Lee Jae-myung's directive to review the cancellation of construction licenses, the possibility of prolonged reputational risk is being discussed.
In the past, when construction companies had 'accidents', usually only the stock price would fluctuate slightly, with little impact on creditworthiness. However, as public interest in major accidents has increased and related laws have been made, stricter penalties have followed, resulting in growing cases where credit ratings are also shaken. There have been precedents where other construction companies, such as GS Engineering and Construction and HDC Hyundai Development Company, saw their credit ratings dropped immediately after collapse and casualty incidents.
On the 13th, according to the investment bank (IB) industry, major domestic credit rating agencies, including Korea Ratings and others, recently issued reports expressing concerns over a potential downgrade of credit ratings for POSCO E&C. Notably, despite no penalties being decided regarding the company's repeated safety accidents, analyses suggest that existing reputational risks alone could lead to performance deterioration.
Korea Ratings noted, "The degradation of trust regarding fair management and the ability to control safety accidents raises concerns over reputational risks and the potential weakening of order competitiveness."
Credit rating agencies pointed out the possibility of long-term performance decline due to image damage. Korea Ratings stated, "Ongoing safety accidents and government administrative actions create a negative perception regarding brand credibility and construction capabilities, which are crucial for order competitiveness. If this continues leading to disruption in new order activities and a decrease in order volumes, it will lead to a fundamental weakening of business competitiveness." Currently, POSCO E&C has been assigned a credit rating of 'A+' and a stable outlook from three credit rating agencies.
Until the first half of this year, POSCO E&C's issuance of public company bonds had been successful. In April, during a demand forecast for the issuance of bonds worth 100 billion won, it managed to secure orders exceeding 283 billion won, successfully issuing a larger amount. However, since July 3, there have been no transactions of bonds over 10 billion won, freezing the market.
In the industry, analyses have emerged suggesting a high possibility of credit rating downgrade for POSCO E&C, considering past cases like HDC Hyundai Development Company and GS Engineering and Construction. Following the collapse incident at the I-Park construction site in Gwangju in 2022, HDC Hyundai Development Company saw its credit rating drop from 'A+' to 'A' shortly after. The outlook was also downgraded to 'negative', forcing them to retreat from the public bond market.
Korea Ratings adjusted the credit rating at that time, stating, "HDC Hyundai Development Company adjusted its housing supply plan downward after the accident, and the disruption of projects due to construction exclusions and contract cancellations is spreading." They added, "Considering the diminished brand recognition and the possibility of business suspension, the variability of overall housing projects, including orders and sales, is expected to persist for the time being." Ultimately, HDC Hyundai Development Company only recovered its credit rating two years later in 2024, being able to issue corporate bonds for the first time after the incident in June of this year.
GS Engineering and Construction also faced a downgrade of its credit rating from 'A+' to 'A' due to an apartment collapse incident that occurred in the Incheon Geomdan New Town in 2023. At that time, both Korea Ratings and NICE Investors Service downgraded GS Engineering and Construction's credit rating outlook from 'stable' to 'negative' immediately after the accident.
In reality, it is true that the accidents had a negative impact on profitability. GS Engineering and Construction recorded an expense of 550 billion won related to rework costs from the Geomdan apartment incident.
Considering precedents, it seems that the key to credit adjustment for POSCO E&C will also be the level of penalties. The situation is not favorable. The police and the Ministry of Employment and Labor have launched compulsory investigations related to the worker electrocution incident, including raids. Additionally, with responsible individuals facing charges of negligent injury, POSCO E&C may be penalized for violations of the Serious Accident Punishment Act for the first time among major construction companies.
An industry official commented, "Although the scale of the accident cannot be seen as large compared to HDC Hyundai Development Company or GS Engineering and Construction, the direct intervention and criticism from the president will create inevitable difficulties in future operations and orders due to political risks." He added, "In November, corporate bonds worth 100 billion won will mature, and the funding environment in the latter half of the year is expected to be challenging."