Rating Action: Moody's assigns Aa2 to Korean Air's proposed notes guaranteed by KDBGlobal Credit Research - 07 Sep 2022Hong Kong, September 07, 2022 -- Moody's Investors Service has assigned a rating of Aa2 to the US dollar senior unsecured notes to be issued by Korean Air Lines Co., Ltd. and guaranteed by Korea Development Bank (KDB, Aa2/P-1 stable).The proceeds from the notes will be used by Korean Air for general corporate purposes, including repayment of existing debt.RATINGS RATIONALEThe Aa2 rating of the notes reflects KDB's Aa2(cr) long-term Counterparty Risk (CR) Assessment, because KDB provides an unconditional and irrevocable guarantee for the notes. The CR Assessment reflects Moody's opinion on the likelihood of default by the bank on counterparty obligations and contractual commitments, including third-party guarantees.KDB's CR assessment is at the same level as the bank's Aa2 deposit and senior unsecured debt ratings. KDB's Aa2 ratings, in turn, reflect its ba2 Baseline Credit Assessment (BCA) and a nine-notch uplift for government support, reflecting Moody's assessment of a government-backed level of support for the bank in times of need.Moody's assumption of full government support reflects Article 32 of the KDB Act, which holds the government responsible for the bank's solvency; the government's 100% ownership of the bank; the absence of legal barriers to timely support; the government's track record of providing equity capital injections; and KDB's close affiliation with the government, given the bank's status as a government-controlled policy bank.KDB's ba2 BCA reflects its sufficient capital buffer, supported by periodic capital injections from the Korean government (Aa2 stable); relatively high asset risk, characterized by credit concentration and exposure to market risk via its significant holdings of equities; solid liquidity; historically weak and volatile profitability; and stable access to funding, despite the bank's heavy reliance on market funding.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGAny change to KDB's long-term CR Assessment would lead to a corresponding change in the rating of the notes.The principal methodology used in this rating was Guarantees, Letters of Credit and Other Forms of Credit Substitution Methodology published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/386295. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.Korean Air Lines Co., Ltd. is a leading airline company in Korea. As of 30 June 2022, the company owned a fleet of 131 passenger aircraft and 23 cargo aircraft serving 120 destinations across 43 countries.Korea Development Bank (KDB) was established in 1954 as a government-owned financial institution pursuant to the KDB Act. With reported consolidated assets of KRW342.4 trillion ($282.5 billion) as of 31 March 2022, KDB is the largest policy bank in Korea.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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