Reporter's Notebook Why Bobcat considered a lifeline to Doosan Heavy

Doosan logo in front of Doosan Tower in central Seoul. Yonhap

By Kim Hyun-bin

Doosan Group's debt restructuring plan to save Doosan Heavy & Construction, a major pillar of the company that builds turbines, power plants and roads, could come down to whether it sells cash cow affiliates Doosan Infracore and Bobcat.

The group is initially seeking to sell Doosan Solus and its Doosan Tower headquarters in Seoul, but is keen to hold onto the two key affiliates. However, creditors are urging it to sell the companies to secure the 3 trillion won it promised to save the debt ridden Doosan Heavy.

Doosan promised the Korea Development Bank and Export-Import Bank of Korea that it would raise 3 trillion won by unloading some "none-core and core assets."

However, it could be problematic to sell off Bobcat as its performance is directly related to Doosan Infracore's performance.

Last year, Doosan Infracore recorded 11.47 trillion won in sales of which 2.86 trillion was made internally through affiliates. Out of this figure, 2.28 trillion was from developing construction equipment in which 40 percent came from Bobcat.

In addition, Bobcat is one of the few remaining cash-cow affiliates of Doosan Group and considered a lifeline for Doosan Heavy. Doosan Heavy's corporate governance comes down to Doosan Group -Doosan Infracore- Doosan Bobcat.

Doosan Infracore is the largest shareholder of Bobcat with 51.05 percent, followed by the National Pension Service with 7.61 percent and the world's largest investment management firm Blackrock with 6.21 percent. The total assets of Bobcat were estimated at 2.35 trillion won as of April this year, and it is positioned to generate 400 billion won in operating profit, annually.

Doosan Heavy has procured major government projects and until it can normalize operations many industry watchers claim Bobcat needs to be held on to.

Doosan Group is left in a tough situation, as many experts believe the selloff of Infracore and Bobcat to save Doosan Heavy could make the conglomerate's financial situation even worse, as they are the only two affiliates capable of generating revenue.

“Excluding Doosan Infracore and Bobcat, there is nothing left,” an official familiar with the issue said. “Many of Doosan Heavy's projects are directly related to the national interest so to normalize the firm's operation, there needs to be restructuring measures to save its key affiliates as well.”

Meanwhile, state-run creditors the Korea Development Bank and the Export-Import Bank of Korea decided to issue an additional 1 trillion won in the form of a bridging loan to Doosan Heavy.

The two creditors have slapped a condition on Doosan Heavy calling for it to transform its business portfolio into an “eco-friendly” one.

The creditors expects the debt restructuring plan will help Doosan Heavy stand on its own.