Korea Ratings, “Kolmar Korea on negative credit rating after CJ Healthcare Acquisition”
Korea Ratings, “Kolmar Korea on negative credit rating after CJ Healthcare Acquisition”
  • Kim Min-jee Reporter
  • 승인 2018.03.27 14:40
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The credit rating agency will register the company’s credit rating as "negative review subject" for Kolmar Korea (CEO Yoo Dong-han), who is suffering from the controversy of the ‘curse of the winner’ for buying CJ Healthcare for a whopping 1.13 trillion won.

Kolmar Korea announced on the 20th of last month that it will acquire 100 percent of CJ Healthcare shares for 1.31 trillion won. The problem is that the loan for the acquisition of CJ Healthcare amounts to 900 billion won (69% of the total). In this case, Kolmar Korea’s total loan will increase from last month’s 12 billion won to 1.98 trillion won this coming April after the acquisition is completed, showing a 455% increase. 

On February 21st, right after the announcement of Kolmar Korea’s plan to acquire CJ Healthcare, Korea Ratings (KR) said, “Kolmar Korea’s corporate credit ratings and unsecured bond credit rating will be registered for a negative review.”

According to KR, Kolmar Korea paid a 4% deposit (50 billion won) at the time of the stock purchase contract signing. The remaining 96% (1.26 trillion won) will be paid in cash at the end of the transaction.

KR said, “After completion of the acquisition, the total amount of external borrowing will be expanded on a consolidated basis to 900 billion won (Kolmar Korea 300 billion won, SPC 600 billion won), and the annual financial cost burden is estimated to be about 35 - 40 billion won. 

Kolmar Korea showed the financial structure of free entry from 2014 to 2015. Despite an increase in net borrowings due to facility investment and equity investment in 2016, the overall level of borrowing was lower than the cash-generating capacity, thus maintaining a good level of financial stability. 

KR said, “As a large portion of the acquisition fund of the 1.31 trillion won will be financed by external loans, such as acquisition financing, it is expected that loan burden will arise in the short term relative to Kolmar Korea’s ability to generate cash on a consolidated basis. In addition, as a separate standard, it is estimated that financial stability will decline considerably, considering that there is an investment burden of 60 ~ 70 billion won per year on the investment of pharmaceutical factories by 2019.”

On the other hand, Kolmar Korea’s CEO Yoon Dong-han expressed confidence in the interview after the acquisition of CJ Healthcare. On the 22th of last month, CEO Yoon said in the Youngnam Daily, “(Concerned with the ‘curse of the winner’) We should be doing our best. If we don’t do our best, it is likely that we will hear such comments, but after a few years, we believe that such view will change. Just wait and see.” 

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