South Korean listed companies’ ability to pay back their debt deteriorated in the first quarter as their earnings declined amid increased bond issues, data showed Thursday.

The average interest coverage ratio of 635 firms listed on the main bourse came to 4.33 in the three-month period, down from 5.58 a year earlier, according to the data by the Korea Exchange and the Korea Listed Companies Association.

The ratio, a firm’s operating profit divided by its interest costs, measures the company’s ability to pay interest on outstanding debt. A reading higher than 1 means the firm earns more than it has to pay in interest, although a drop in the reading indicates the firm’s debt-repayment ability has deteriorated.

According to the data, the combined interest cost of the companies examined jumped 8.72 percent on-year to 3.7 trillion won ($3.15 billion), while their operating profit dropped 15.6 percent to just under 16.2 trillion won.

“The data showed that for every 1,000 won in earnings, companies paid out roughly 231 won in interest, which is an increase from 179 won in the first quarter of 2011,” the KRX said. 

(Yonhap News)