“Credit Checkpoint” is a column that assesses the credit rating risks of companies preparing to issue corporate bonds by examining their financial structure and cash flows. We evaluate a company’s short- and medium-term financial stability by focusing not only on the numbers in its financial statements but also on the quality and sustainability of its cash flows. We highlight key financial indicators and potential risk factors to help corporate bond investors and market participants assess a company’s creditworthiness from a more comprehensive perspective. <Editor’s Note>

[E-Daily Marketin Reporter LEE GEON-EOM ] Despite solid performance, COWAY(021240)has seen its net debt burden trend upward for the fifth consecutive year. Financial soundness appears to be eroding as working capital pressures stemming from expanding rental revenue are compounded by aggressive shareholder return policies. Furthermore, both debt dependency and the net debt-to-equity ratio are rising in tandem, exacerbating the financial burden.

According to the financial investment industry on the 1st, COWAY will conduct a bookbuilding process on the 2nd to issue corporate bonds worth 200 billion won. Depending on the success of the bookbuilding, the company plans to increase the issuance amount to up to 400 billion won.

The market views COWAY’s solid market position and stable business foundation favorably. At the same time, however, there is a palpable sense of caution regarding the trend of net debt increasing for five consecutive years.

COWAY’s consolidated revenue for the first half of this year was 2.7719 trillion won, a 13.9% increase from 2.4338 trillion won in the same period last year. Operating profit and net income also rose by 11% and 22.4% year-over-year, reaching 504.1 billion won and 360.3 billion won, respectively.

The issue is that, despite the strong financial performance, cash flow has actually slowed. COWAY’s cash flow from operating activities in the first half of this year was negative (-) 54.7 billion won, with the net outflow widening compared to the same period last year (-15.8 billion won). Analysts attribute this to a significant increase in finance lease receivables driven by the expansion of rental sales.

Capital expenditures (CAPEX) for the acquisition of rental assets also continued. CAPEX for the first half totaled 107.5 billion won. Reflecting this, free cash flow (FCF) stood at minus (-) 162.2 billion won, with the outflow widening compared to the same period last year (minus 141.6 billion won). A negative FCF indicates that the cash generated from core operations alone was insufficient to cover even capital expenditures, meaning the company’s reliance on external funding has increased accordingly.

In fact, COWAY’s net debt burden has increased every single year for the past five years without exception. Total debt stood at 2.672 trillion won at the end of the first half of this year, a 22.9% increase from the end of the previous year (2.1738 trillion won). COWAY’s net debt was: △817.7 billion won in 2021 △1.0735 trillion won in 2022, △1.0872 trillion won in 2023, △1.3508 trillion won in 2024, and △1.9862 trillion won in 2025. By the end of the first half of this year, it had swelled to 2.5247 trillion won—more than tripling in just over five years.

The debt-to-asset ratio—calculated by dividing total debt by total assets—exceeded the generally accepted appropriate level of 30% for the first time last year. After reaching 31.1% at the end of 2025, it rose to 34.4% in the first half of this year.

The net debt ratio—which compares the actual debt burden (total debt minus cash and cash equivalents) to equity—also surged. It rose by 11.2 percentage points, from 55.1% at the end of last year to 66.3% in the first half of this year. This means the company is effectively carrying a debt burden equivalent to two-thirds of its equity. Analysts note that the steeper the rise in this ratio, the thinner the company’s financial buffer against external shocks becomes.

This is also placing a significant strain on COWAY’s credit rating. Credit rating agencies cite an EBITDA-to-total debt ratio of 3x as a factor for a potential downgrade of COWAY’s rating. COWAY’s ratio more than doubled, rising from 0.8x in 2021 to 1.9x at the end of the first half of this year. The company is actually moving further away from the 15% net debt-to-equity ratio threshold required for a rating upgrade.

Kim Yu-bin, a senior researcher at NICEHoldings Credit Rating, stated, “The debt burden is increasing due to investment needs and expanded shareholder returns,” adding, “Given the high collectability of rental receivables, the company’s actual financial stability remains excellent.”

She added, “We plan to closely monitor trends in cash flow and financial stability resulting from increased shareholder returns—such as dividend payments—and investment funding requirements.”