Doosan puts down liquidity fears

By Kim Yoo-chul

Doosan Group was not always smart in handling liquidity.

But the conglomerate has improved its situation. Its Chairman Park Yong-maan has completed a series of high-profile acquisitions that have turned the light-industry business into a heavy industry conglomerate.

One noticeable thing is that the confidence levels for Doosan stocks are not great because of the group’s construction unit Doosan E&C.

Doosan E&C was blamed for group-wide liquidity problems since last year as the nation’s construction-related industries were suffering amid economic uncertainties.

As of the end of June last year, the total debt by Doosan E&C was some 2.3 trillion won and it should fully handle 1.31 trillion won in debts after its subcontractors had been in struggle for payments amid the bad local building industry.

Now Doosan E&C needs 2 trillion won by the end of this year as the group’s construction affiliate must pay one-year maturity of asset-backed commercial paper (ABCP) and borrowing with 886 billion won and 1.12 trillion won since July last year _ another big headache.

To prevent Doosan E&C from another liquidity problem, Doosan Group has been very active. The group has helped E&C raise capital of 630 billion won within the first half of this year using all measures in financial markets.

“Well, the key problem is that there’s not much that Doosan E&C can do itself without support from the group. Doosan E&C should instead focus on restoring investor confidence that it can do well and make the things right away,” said a fund manager based in Seoul, asking not to be identified.

“We sold off Doosan E&C stocks months ago as we don’t believe Doosan E&C completely washed off liquidity-centric concerns,” said the manager. He was not given the right to officially speak to the media.

Doosan officials said local building projects that Doosan E&C was undertaking haven’t seen a drastic improvement, burdening the group’s construction affiliate’s financial soundness.

“Some apartment-building projects in local cities have seen meager improvement, burdening Doosan E&C and that’s why we sold off Doosan E&C stocks,’’ added the manager.

The local construction sector is still in trouble and concern about economy-wide inflation pressures outweighed risks from falling house prices, according to construction analysts.

The South Korean government was seeking measures to support the industry, however, analysts have said that it will be difficult to find a good solution unless homebuyers’ sentiment improves, they said.

The property market has emerged as a major political concern and Doosan E&C is among those facing cash-related troubles.

Despite such concerns, markets expect Doosan Group to help Doosan E&C raise more money as part of the group-wide strategy to regain investor confidence.

``Doosan E&C is expected to raise an additional 540 billion won in the latter half of this year by selling some of its assets and issuing corporate bonds,’’ said one analyst from a Europe-based investment bank, asking not to be identified.