Doosan aims to raise W2 tril. from new share sale
Unnamed pedestrians pass by the logo of Doosan Group, downtown Seoul, Wednesday. Yonhap
By Kim Yoo-chul
In an equity financing move, Doosan Group will offer new shares at the earliest possible date in the third quarter to pay off the debt of its ailing construction affiliate, two official sources familiar with the issue said Wednesday.
“Details of Doosan Group's self-restructuring plans will be finalized early next month. After fixing specifics aimed at saving the group including the sale of some of the group's core assets, Doosan Group will offer new shares and use the money raised to aid Doosan Heavy,” one official said.
Regarding how much liquidity Doosan is hoping to raise from the equity financing initiative, the official said, “Doosan wants to raise at least 2 trillion won.”
The group's creditors ― the Korea Development Bank and the Export-Import Bank of Korea (Eximbank) ― recently approved the group's request to convert a $500 million foreign currency bond issued by Doosan Heavy Industries and Construction into a loan with a due date of one year.
But the emergency financial assistance from its creditors may not be enough for the mid-tier conglomerate to be able to sustain itself, and the group could face having to unload relatively stable (in terms of growth potential) affiliates as its only option.
The official said Doosan submitted a self-restructuring plan that included selling its OLED components-manufacturing and fuel cell affiliates, in addition to cutting the number of its employees, to the Eximbank. Doosan is in talks with SK and Samsung SDI regarding the sale of its OLED unit.
Doosan Heavy has to pay off 4.2 trillion won in debt with a due date at the end of the year. This is comprised of 1.25 trillion in corporate debt; 1.1 trillion won owed to state lenders; 780 billion won to private lenders; 360 billion won to foreign banks operating here; and 700 billion won in various short-term loans.
Corporations issue shares to raise capital to fund business operations. Using the money raised to pay down or pay off outstanding short- or long-term debt, in equity financing, ensures the companies can avoid taking out loans from commercial banks that would charge them variable interest rates, adding to their financial burden.
After the completion of the shares sale, Doosan Heavy is expected to move forward with a creditor-led plan to restructure its entire portfolio, as the company is still heavily reliant on gas turbine and wind power legacy businesses.
Doosan Heavy CEO Choi Hyung-hee recently told its shareholders that the group affiliate was aiming to get 50 percent of its overall sales from new businesses by 2023. But no substantial progress has been seen even though the world's nations pledged to cut their individual CO2 emissions as part of the Paris Agreement.
“Without business restructuring, Doosan Heavy can't survive,” an industry executive said.