Arrest hurts Samsung's image but credit rating stays intact

Kim Hong-Ji | Reuters

Samsung Group chief, Jay Y. Lee, leaves after attending a court hearing to review a detention warrant request against him at the Seoul Central District Court in Seoul, South Korea, January 18, 2017.

Lee’s arrest poses another risk to Samsung’s image following last year’s recall and suspension of the Galaxy Note 7, Fitch Ratings and S&P Global warned in separate statements late on Monday.

Lee, heir apparent to the company, was arrested on Friday on charges of perjury, embezzlement and bribery over his alleged role in a corruption scandal involving South Korean President Park Geun-hye. Lee was accused of paying bribes worth nearly $40 million to organisations linked to Park’s friend, Choi Soon-sil, in order to gain government approval for a merger of two Samsung units.

His arrest is likely to delay strategic investment and weigh on investor sentiment in the short term, Fitch flagged. The hit to corporate leadership could also cause some delays in key strategic decisions, such as mergers and acquisitions, S&P added, which may undermine the company’s competitive position in the longer run.

Still, strong metrics will continue to underpin the tech giant’s credit rating, the two agencies noted, echoing similar sentiments from Moody’s on Friday.