[Edaily Marketin Reporter LEE GEON-EOM ] SK Innovation(096770)has decided to merge with its subsidiary SK ie technology(361610)(SKIET), and analysts have concluded that the impact of this merger on its short-term creditworthiness will be limited. While the subsidiary’s financial results are already reflected in the consolidated financial statements and the company can meet funding needs through its cash reserves, analysts point out that it is necessary to monitor trends in medium- to long-term financial burdens, such as the excessive level of net debt and the sluggish business conditions in the chemicals sector.

Korea Credit Rating Agency (KCR) and NICEHoldings (NICE CR) made these remarks in a commentary released on the 26th regarding SK Innovation’s “decision to merge with SK ie technology through an absorption merger.”

Previously, on the 25th, SK Innovation and SKIET passed board resolutions to merge with their subsidiary SKIET through an absorption merger, with the aim of restructuring their business and improving operational efficiency. The merger ratio is 0.117454 shares of SK Innovation for every 1 share of SKIET, and the merger effective date is January 1, 2027.

As the surviving company, SK Innovation qualifies for a “small-scale merger,” so shareholders are not entitled to a right of appraisal. NICE Ratings assessed that there would be no immediate impact on creditworthiness, given that SKIET is already a consolidated subsidiary.

Lee Young-kyu, a senior researcher at Nara Credit Rating, analyzed, “SK Innovation’s consolidated financial statements currently reflect the performance of its subsidiary, SK ie technology,” adding, “Therefore, the absorption merger of SK ie technology will have no impact on SK Innovation’s credit rating.”

Accordingly, NICE Ratings placed SKIET’s credit rating on review for an upgrade, taking into account that SKIET’s corporate bonds and commercial papers—which are scheduled to be extinguished—will be transferred to SK Innovation. Hanwha Credit Rating also predicted that while funding needs may arise during the merger process due to the exercise of stock purchase rights and creditor protection procedures, SK Innovation is fully capable of addressing them.

Jang Su-myeong, a senior analyst at Han Shin Rating, stated, “Based on approximately 2 trillion won in cash reserves and SK Innovation’s ability to secure alternative funding, it appears the company will be able to meet the funding needs related to the merger,” adding, “We believe that the restructuring of the business portfolio for the battery and materials sectors has been largely completed following the decision to merge with SKIET.”

However, both Han Shin Rating and Na Shin Rating agreed that SK Innovation needs to manage its excessive debt burden, despite improved profitability in the petroleum sector. In fact, SK Innovation’s consolidated net debt as of the end of June this year amounted to approximately 26 trillion won.

Accordingly, the two credit rating agencies plan to closely monitor the extent to which financial burdens are alleviated through the cash-generating capacity of key business segments, the effects of business restructuring, and the sale of non-core assets. In particular, they explained that further review is still needed regarding the possibility of restructuring the chemicals division, where unfavorable market conditions persist.