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Doosan near completing self-rescue plan with E&C sale

Doosan Group in final stages of talks to sell Doosan E&C to S.Korea's Q Capital-led consortium

By Nov 12, 2021 (Gmt+09:00)

Doosan near completing self-rescue plan with E&C sale

South Korea's Doosan Group is near finalizing a deal to sell Doosan Engineering & Construction Co. (Doosan E&C) to a consortium led by Seoul-based Q Capital Partners Co. The transaction, if completed, will allow the conglomerate to terminate its creditor-led restructuring program in one and a half years, ahead of the original three-year timeline. 

"Doosan Group has been putting efforts into selling Doosan E&C to graduate from the creditor-led restructuring program within this year," said an industry banking source on Nov. 12. "My understanding is that they have reached a group-wide agreement to sell the company to a Q Capital-led consortium."

The value of the upcoming deal was not disclosed yet.

In June 2020, Doosan Group received 3 trillion won ($.2.5 billion) in emergency funding from creditors led by Korea Development Bank, on conditions of improving its financial conditions over a three-year period.

Under the restructuring plan, Doosan Group has sold Club Mow CC, a golf course operator, for 185 billion won; NEO Plux, an investment firm, for 73 billion won; Doosan Tower, its headquarters building, for 800 billion won; Doosan Solus, a copper foil manufacturer, for 698.6 billion won; Doosan Mottrol for 453 billion won; and Doosan Infracore Co. for 850 billion.

NOT EASY TO FIND A BUYER

Unlike its sister companies, however, Doosan E&C had failed to draw interest. The parent group's negotiation with Daewoo Development Co., Ltd.- Engineering & Construction Co. to sell the apartment builder broke down last year due to price differences. Earlier this year, it had entered talks with another South Korean PE firm to dispose of the construction arm, but little progress has been made.

After closing the stalled sale of Doosan Infracore to Hyundai Heavy Industries Holdings Co. at the end of August of this year, the group sped up efforts to find a buyer, tapping PE firms and sounding out their interest in the construction unit.

Doosan near completing self-rescue plan with E&C sale
If Doosan Group pays back the 3 trillion won debt to creditors by year-end, it will complete the self-rescue plan in one and a half years, which would make it the fastest South Korean conglomerate to do so.

Its main creditor KDB is also positively considering terminating the group's restructuring program. 

By comparison, Dongkuk Steel Mill Co. had completed its debt restructuring program over a two-year period in 2016. For Kumho Group, it was forced to hand over its ownership of Asiana Airlines Inc. to creditors after failing to fulfill its self-rescue plan. The air carrier was later sold to Korean Air Lines Co

For Q Capital, Doosan E&C will become the first builder among its portfolio companies. Betting on a recovery in the construction industry, the PE firm is in the final stages of fundraising from investors, including Shinyoung Securities Co. and Eugene Asset Management Co. But it will not seek a strategic partner.

Q Capital focuses on small- to medium-sized Korean companies, with about 1 trillion won in assets under management. Its portfolio includes fried chicken franchises Genesis BBQ Co. and Norang Tongdak; Youngpoong Paper MFG Co.; Curo Country Club; K-One Co.; and Kakao VX. 

Doosan's offshore wind turbines near Jeju Island
Doosan's offshore wind turbines near Jeju Island

The planned sale will accelerate Doosan Group's transition to eco-friendly businesses such as wind power, hydrogen and small modular reactors.

However, there is still a risk of the deal's possible collapse, if Q Capital fails to achieve its funding target in the coming weeks. It may need to sign a definitive agreement by next week, considering the antitrust review process of an acquisition, which generally takes one month according to industry sources.

Write to Chae-yeon Kim at why29@hankyung.com

Yeonhee Kim edited this article

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