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Doosan Infracore to issue $85.4 mn in bonds; stake sale bidding now Sept. 28

Sep 25, 2020 (Gmt+09:00)

Doosan Infracore Co., South Korea’s top construction equipment maker, plans to sell 100 billion won ($85.4 million) in corporate bonds to raise funds for loan repayment.

According to the investment banking industry on Sept. 25, the machinery-making unit of Doosan Group recently named state-run Korea Development Bank, Kiwoom Securities, KB Securities and NH Investment & Securities as managers for the October sale of the debt with two-year maturity.

A special-purpose vehicle (SPV), set up by the government to help companies with low credit ratings issue corporate bonds, will step in to purchase the debt from Doosan if it fails to attract enough buyers, according to sources close to the matter. Sources said the SPV will acquire the remainder of the bonds left unsold.

Doonsan Infracore’s credit rating stands at BBB, the second lowest on a 10-grade scale for investment in corporate bonds. Debt below a BBB rating is usually considered non-investment grade.

Analysts said Doosan is expected to pay high yields on the debt to attract as many investors as possible. One-and-a-half-year debt recently issued by Doosan Infracore carried a yield of 3.86% per annum.
The sale of a controlling stake in Doosan Infracore has been delayed by one week
PRELIMINARY BIDDING FOR STAKE SALE DELAYED

Meanwhile, the preliminary bidding for the sale of a controlling stake in Doosan Infracore has been delayed to Sept. 28 from the originally set Sept. 22.

The postponement came after some potential investors requested more time to prepare for the bidding, according to officials with knowledge of the matter.

Doosan Group, together with the sale manager Credit Suisse, has put up a 36.27% stake in Doosan Infracore, currently held by Doosan Heavy Industries & Construction Co., as part of the group’s restructuring efforts.

Hyundai Heavy Industries Co. is reportedly among the most likely bidders for the Doosan Infracore stake, but the company has so far denied any interest in its local rival.

North Asia-focused private equity firm MBK Partners and some other local private equity firms are also known to be considering a bid.

LEGAL HURDLE LIKELY TO BE LIFTED FOR NEW BUYER

Market watchers said the likelihood of stake sale increased following Doosan Group's offer to ease the financial burden linked to an ongoing legal dispute between Doosan Infracore and some financial investors.

In 2011, the company raised 380 billion won from financial investors through its China-based unit based on a commitment to go public by April 2014. However, the company was unable to list due to poor market conditions. Some financial investors filed suit in a Korea court after they failed to exercise their drag-along rights to sell their stake in the company.

The investors won the first case in a lower court, but lost the second ruling in a higher court. Both sides are awaiting the final ruling from the Supreme Court. Analysts said if the top court rules in favor of the investors after the Doosan Infracore sale is complete, the buyer may have to cough up as much as 1 trillion won in compensation.

By Jin-Seong Kim and Sang-eun Lucia Lee

Jskim1028@hankyung.com selee@hakyung.com



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