Korean Air Lines Co. ended last year with a credit rating downgrade and debt-to-equity ratio approaching 1,000 percent - the worst among Asian full-service carriers. Investors of the money-losing airline face an even bleaker 2017 as a weaker won raises the cost of repaying foreign debt.

The Korean currency is projected to weaken around 7 percent against the dollar by December, according to the median of forecasts in a Bloomberg survey of analysts. Korean Air's foreign currency debt accounts for more than 70 percent of total borrowings.

Korean Air had 14.72 trillion won (US$13 billion) in total borrowings as of September, the latest company disclosure shows. Of the total debt, 62.5 percent is in dollars and 11.9 percent in other foreign currencies.

Around US$589 million of the Korean flag carrier's U.S.-dollar loans come due this year: Bloomberg-compiled data.

Total borrowings at smaller rival Asiana Airlines Inc. stood at 4.43 trillion won at the end of 2016, 51.8 percent of which is in foreign currencies, company filings show.

Asiana and Korean Air both face the prospect of credit rating cuts this year, according to Korea Investors Service, the local affiliate of Moody's Investors Service. Korean Air's debt-to-equity level stood at about 917 percent as of the quarter ended Sept. 30, based on company filings. It could "have easily gone over 1,000 percent" by the fourth quarter, said Kim Bong-kyun, an evaluation team manager at Korea Ratings, a local affiliate of Fitch Ratings.

"Less Favorable"

"The operating environment is likely to become less favorable this year, and airlines will find it even more difficult to ease their debt burdens," said Kim Jung-hoon, an analyst at Korea Investors Service. "We are seeing more reasons for downward credit rating revisions," he said in an interview in January.

Korean Air's leverage ratio trails only Air Canada among full-service airlines worldwide, according to data compiled by Bloomberg. Together with Asiana, they are among the most indebted among Asian full-service carriers, the data show.

Last month, Korean Air said it plans to issue 450 billion won of new shares to be used for working capital. It didn't proceed with an earlier plan to sell around US$100 million of 30-year bonds not callable for three years in September.

Korean Air currently has no fundraising plan apart from rights issue, and is working to address its debt problems, said a company official who declined to be identified, citing the carrier's policy.

The rights offer plan is positive for Korean Air's cash flows but likely won't be enough to significantly ease the carrier's worsening financial structure due to expected net losses for the year ended December, Korea Investors Service said in a report last month.

"We will have to see how their efforts actually show in numbers," said Kim Hong-joong, the Seoul-based head of fixed income at Hanwha Asset Management Co., which oversees 76 trillion won in assets. "So far, it has not been adequate."

Korean Air is scheduled to announce results Wednesday, with the company projected to post its fourth straight annual net loss. Analysts predict Korea Air will report a net loss of 399 billion won for 2016, according to the average of 14 estimates compiled by Bloomberg.