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Doosan sells E&C, closer to exiting self-rescue program

Creditor banks will review whether to approve Doosan's exit from the creditor-led program within the year

By Nov 19, 2021 (Gmt+09:00)

Doosan sells E&C, closer to exiting self-rescue program

South Korea's Doosan Group on Friday inked an agreement to sell a majority stake in Doosan Engineering & Construction Co. (Doosan E&C) to a consortium of domestic financial investors for 138 billion won ($116 million).

The stake sale will likely bring the conglomerate's self-rescue program to an end in one and a half years. Under the creditor-led restructuring program, Doosan was required to jettison profitable assets to improve its financial conditions over a three-year period, in return for receiving 3 trillion won in emergency funding last year. 

Under the Friday agreement, Doosan Heavy Industries & Construction Co. is disposing of a 54% stake in Doosan E&C, while retaining the other 46% stake. The consortium of its buyers is comprised of Seoul-based Q Capital Partners, SkyLake Equity Partners, Woori Private Equity, Eugene Asset Management Co. and Shinyoung Securities' private equity division.

Q Capital, as an anchor investor, will put 90 billion won into the acquisition, followed by SkyLake with 30 billion won and a team of Eugene Asset and Shinyoung with 18 billion won. They are aiming to complete the transaction within the year.

Separately, Doosan Group will inject 120 billion won as a mezzanine investor into the consortium's special purpose company to be established for the stake purchase of Doosan E&C. 

A strong rebound in Doosan E&C's business paved the way for the stake sale, along with a recovery in the construction industry. Its operating profit more than doubled to 54.3 billion won in the first nine months of this year, compared to the previous year's 23.8 billion won. 

Doosan sells E&C, closer to exiting self-rescue program

AT THE CENTER OF THE GROUP'S LIQUIDITY CRUNCH

Doosan E&C was pinpointed as the source of its parent group's liquidity problems, and thus has been the most difficult of the group's assets to sell.

Last year, the group failed to sell the apartment builder to Daewoo Development Co., Ltd.- Engineering & Construction Co. due to price differences.

Since last year, 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.

Including the proceeds from the latest stake sale of Doosan E&C, the business group will now be left with about 700 billion won in liabilities owed to the creditor banks. The lenders, including Korea Development Bank and Export-Import Bank of Korea, will review whether to approve of Doosan Group's exit from the restructuring program within the year. 

If Doosan completes the self-rescue plan in one and a half years, it will become the first South Korean conglomerate to finish the program within such a short period of time. Now it is expected to accelerate its transition to eco-friendly businesses such as wind power, hydrogen and small modular reactors.

For Q Capital, Doosan E&C will become the first builder among its portfolio companies. It 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. 

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

Yeonhee Kim edited this article.

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