Doosan Infracore issues $300 mn dollar bonds amid corporate restructuring

 

Doosan Infracore Co. Ltd., a Korean machinery manufacturer, has successfully issued dollar-denominated bonds worth $300 million despite concerns that the company may be sold off as part of the corporate restructuring led by parent company Doosan Group.

The company was able to secure enough demand for the three-year maturity bonds backed by state-run Korea Development Bank (KDB). Doosan Infracore, one of profit-making units of Doosan Group, said it plans to use the proceeds for loan repayments and operations.

According to industry banking sources, the debt sale attracted $600 million from 38 foreign investors during the bookbuilding conducted on July 14, double the amount raised. Asian investors accounted for 93%, with the remaining 7% from Europe.

Despite being put up for sale, the higher-than-expected demand for the debt was supported by the state-owned KDB’s guarantee, which will not be affected even if there is a change in Doosan Infracore’s ownership.

The bonds will be issued with yield-to-maturity of 1.058% annually, which is about 0.875% points higher than the US Treasury's yield with the same maturity. The issued bonds will have AA-credit ratings, the same as KDB, which will help Doosan Infracore to reduce financing costs.

Nomura Securities, Korea Development Bank, Standard Chartered Securities, and UBS were joint bookrunners.

Earlier in January, Doosan Infracore issued BBB-rated won-denominated bonds with yield-to-maturity of 4.433% annually - without a guarantee.

This year has been quite stormy for Doosan Group which decided to offload its core assets in an attempt to salvage its business. The South Korean conglomerate accumulated much debt after engaging in hefty M&A deals, and in particular took a heavy hit when the government announced its plans to depart from nuclear and coal power which had been the core business for Doosan Heavy Industries & Construction Co. Ltd., the profit-making arm under Doosan Group.

The continued financial decline left no choice for the debt-laden conglomerate but to divest its assets. The group has recently selected preferred buyers for copper and biomaterial maker Doosan Solus Co. Ltd., worth around 700 billion won ($582 million) and Club Mow CC, a 27-hole golf course located in Gangwon province, east of Seoul, valued around 185 billion won.

Doosan Group has fetched about 3.6 trillion won in financial support from creditors including KDB and Export-Import Bank of Korea. As part of self-rescue measures, the cash-strapped group has pledged to raise 3 trillion won through divestments, paid-in capital increase, and capital expansion.

Write to Jin-sung Kim at jskim1028@hankyung.com