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Doosan Heavy to wrap up first-round restructuring with $1.1 bn new share sale

Sep 04, 2020 (Gmt+09:00)

Doosan Heavy Industries & Construction Co. Ltd., the debt-ridden South Korean power plant builder, is set to wrap up the first round of its debt restructuring by raising 1.3 trillion won ($1.1 billion) through rights issues, with its group chairman and family shareholders divesting of two other units, the Doosan Group said on September 4.

Proceeds from the divestment will be used to buy new shares of Doosan Heavy, which plans to use the fresh capital to repay debts.

On top of the new share sale, Doosan Heavy will receive 574 billion won ($482 million) worth of shares in affiliate Doosan Fuel Cell Co. Ltd., held by parent group Chairman Park Jeong-won and other stakeholders, to improve its financial status.  Acquiring the shares will render Doosan Heavy the largest shareholder in the hydrogen fuel cell maker with a 17.8% stake.

Doosan Group Chairman and CEO Park Jeong-won
Doosan Group Chairman and CEO Park Jeong-won

Simultaneously, the group’s holding company Doosan Co. Ltd. and its family shareholders have agreed to sell their shares in two profit-making units --Doosan Solus Co. Ltd. and Doosan Corporation Mottrol -- to domestic private equity firms.

The stake deals will bring in 1.15 trillion won of new capital, enough for the top shareholders to participate in Doosan Heavy’s new share sale.

The rights offering and stake sales are part of Doosan Group’s self-rescue efforts to keep the beleaguered Doosan Heavy afloat, wrapping up the first round of its debt restructuring.

In return for a 3.6 trillion won bailout from creditors, Doosan Group has pledged to raise 3 trillion won through the sale of core units, including Doosan Infracore Co. Ltd., as well as paid-in capital increases. Doosan Heavy’s debt-to-equity ratio has reached 300%, with about 4 trillion won in debts estimated to mature this year, as of April.

“A series of decisions, following the sale of Club Mow CC and Neoplux, will lay the ground for returning Doosan Heavy to normal,” Doosan Group said in a statement.

Last month, the group sold Club Mow, a golf course, for 185 billion won and a 97% stake in venture capital firm Neoplux Co. Ltd. to Shinhan Financial Group for 73 billion won.

“Those sales enabled Doosan Co. to secure enough capital to participate in Doosan Heavy’s rights offering,” it said. Doosan Co. has a 45% stake in Doosan Heavy.

Continuous financial support to troubled affiliate Doosan Engineering & Construction Co. Ltd. has widened shortfalls at Doosan Heavy. The parent group’s $4.9 billion acquisition of Bobcat in 2007 also pushed the Doosan Group units into debt due to heavy borrowing costs.

Doosan Group is aiming to complete the 3 trillion won self-rescue measures by year’s end with the sale of Doosan Heavy’s stake in Doosan Infracore Co. Ltd., a machinery manufacturer.


Doosan Heavy has recently begun the sale process of its 36.27% stake in Doosan Infracore, with the preliminary bidding deadline set for Sept. 22. The group is expecting the stake deal to pull in at least 1 trillion won, a 60% premium to its market value of 609 billion won based on Friday’s closing price.

Doosan Bobcat, owned by Doosan Infracore, will be excluded from the proposed sale of the Doosan Infracore stake this time. But market talk is that Doosan could put Bobcast on the market, depending on the result of the Infracore stake sale.

The recent share price surge set the stage for Doosan Heavy to sell new shares. Robust stock prices in other Doosan units also paved the way for Chairman Park and other family shareholders to offer up their shares in Doosan Fuel Cell, as well as in Solus and Mottrol, in a gesture of responsibility for the troubled unit’s debt restructuring.

Shares of Doosan Heavy spiked to their highest level in more than two years this week on expectations of new business opportunities from wind power plants and the US nuclear power plant market. Shares closed flat at 16,300 won on Friday.

Shares in Doosan Fuel Cell have shot up tenfold over the past six months, buoyed by the government’s initiative to expand green energy. The stock closed up 1.44% at 45,650 won on Friday (Sept. 4) . Doosan Solus's share price more than doubled during the same six-month period, but ended down 0.36% at 41,450 won on Friday.

As a new top shareholder in Doosan Fuel Cell, Doosan Heavy will transform itself into an environmentally friendly energy company with focus on wind turbines, renewable energy and small modular reactors as well as hydrogen fuel cells, the parent group said in the statement.

Doosan Fuel Cell controls about 80% of South Korea’s fuel cell market for power plants. On Friday, it announced a plan to raise 342 billion won through a rights offering to fund facility expansion.

By Chaeyeon Kim, Sang-eun Lucia Lee and Jun Ho Cha

Yeonhee Kim edited this article

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