Nearly 9 percent of a majority of South Korea’s top 500 companies are unprofitable and highly indebted “zombie” firms that are incapable of paying interest on loans with operating profit, data showed Wednesday.

According to market researcher CEO Score, the interest coverage ratio for 33 out of 380 companies hovered below 1 for the third straight year in 2015. 

This means they cannot generate enough operating profit to pay taxes and interest payments or require constant bailouts. 

If companies whose interest coverage ratio stayed below 1 for two years in a row are included, the percentage rose to 11.3 percent, said CEO Score.
Interest coverage ratio, a firm’s operating profit divided by its interest costs, measures a company’s ability to pay interest on outstanding debt. 

A reading below 1 means it cannot pay interest with operating profit.

According to the data, the combined operating loss of the 33 zombie companies reached 5.1 trillion won ($4.5 billion) last year, up 34.4 percent from a year earlier. 

(khnews@heraldcorp.com)