Research Update: SK Innovation Outlook Revised To Negative On Aggressive Financial Policy And Higher Debt; 'BBB+' Rating Affirmed

We believe SK Innovation's (SKI) financial policy has become more aggressive over the past 12 months, evident from increasing capital investments, shareholder returns, and debt level. We also expect the ratio of SKI's debt to EBITDA to hover around our downgrade trigger of 1.5x over the next 24 months, due to the volatile oil refining market. We are revising the outlook on SKI to negative from stable. At the same time, we are affirming our 'BBB+' issuer credit rating on SKI and 'BBB+' issue rating on the company's senior unsecured debt. The negative outlook on SKI reflects our view of a more than one-third likelihood of a downgrade, considering that the company's financial credit metrics could have a narrow headroom

...+ We believe SK Innovation's (SKI) financial policy has become more aggressive over the past 12 months, evident from increasing capital investments, shareholder returns, and debt level. + We also expect the ratio of SKI's debt to EBITDA to hover around our downgrade trigger of 1.5x over the next 24 months, due to the volatile oil refining market. + We are revising the outlook on SKI to negative from stable. At the same time, we are affirming our '###+' issuer credit rating on SKI and '###+' issue rating on the company's senior unsecured debt. + The negative outlook on SKI reflects our view of a more than one-third likelihood of a downgrade, considering that the company's financial credit metrics could have a narrow headroom to maintain the current rating over the next 24 months....

Research Update