SEOUL, KOREA - The Korea Gas Corp. is set to increase its capital by 600 billion won next month. This is the first instance of attempting to improve the financial standing of a state-run enterprise through a capital increase after the Park Geun-hye administration demanded state-run corporations to reduce their debts in strong terms.

 

According to investment banking sources on May 16, KOGAS will send out requests for proposal to select underwriters by the end of this month. As soon as the company selects underwriters, it will move on with recapitalization. The last time KOGAS conducted a capital increase was in 1999. The main motivation behind the latest capital increase is to reduce its debt level. As of the end of the first quarter this year, the company's debt ratio was 390.05 percent, up from 385.39 percent at the end of 2012.

 

KOGAS has ambitious plans to invest in overseas resource development projects including shale gas wells. But the high debt ratio has prevented it from doing so. After the recapitalization, the company's debt ratio is expected to fall to a level of the early 300's.