By Kim Yoo-chul
Staff reporter
Doosan Group Thursday disputed skeptical views about the fiscal soundness of its key affiliates.
"It's totally groundless that the Doosan Group is facing liquidity problems,'' senior group spokesman, Shin Dong-gyu told The Korea Times.
The remarks came days after shares of its core units plummeted on worries over deteriorating cash balances of the group's construction affiliates.
On Tuesday, shares of Doosan Group plunged 12.65 percent, while that of Doosan Heavy, Doosan Construction and Doosan Infracore decreased by 8.7 percent, 8.8 percent and 8.5 percent, respectively.
The construction unit's issuance of 130 billion won in corporate bonds in the bearish property market had been cited as grounds for skepticism by some analysts and market watchers.
Doosan Heavy, the group's power plant and desalination unit, owns 52.2 percent of Doosan Construction ― a fact that was questioned by investors over a possible "vicious cycle."
"The issuance of corporate bonds doesn't have any direct link with liquidity worries. The three-year bonds were sold with an interest rate of 5.95 percent, which is quite favorable," Shin said.
The executive added Doosan Construction is planning to lower its debt to below 350 billion won by the end of this year from 910 billion won as of April.
"We didn't find any valid reasons to explain the decline of the Doosan shares. Their first quarter earnings were quite solid and growth momentum is also high," Jeon Jae-chun, an analyst at Daishin Securities, said, adding it is highly unlikely that its construction unit will fall under the burden of project financing (PF) lending.
The operating profit of Doosan Group spiked by 168.1 percent in the first three months of this year from a year earlier, while that of Doosan Infracore jumped 138.8 percent during the same period.
Doosan Vice Chairman Lee Jae-kyung bought 5,000 new shares as part of the moves to water down what the group says is a "groundless rumor."
The group had been hit by liquidity worries from its purchase of the Bobcat business from U.S.-based Ingersoll-Rand for $4.9 billion in 2007.
Doosan was injecting $720 million into Doosan Infracore International, DII, which consists of Bobcat to ease liquidity problems.
"The financial soundness of Doosan Construction seems stable. Demand is strong for the unit's corporate bonds and it has been receiving cash steadily from the building business," Chun Yong-ki, an analyst at Meritz Securities, said.
Shares of Doosan declined 5.12 percent, while that of Doosan Infracore lost 3.58 percent. Doosan Construction retreated 3.88 percent, KRX said.
South Korean shares closed lower Thursday, ending below 1,700 points for the first time since March, on worries about European fiscal problems and the impact on global liquidity.
The Korea Composite Stock Price Index, or KOSPI, tumbled 34.04 points, or 2 percent, to 1684.71, the lowest closing since March 24.