Hyosung Chemical makes emergency investment in crisis-hit Vietnamese subsidiary

Hyosung Chemical announced on Monday that it will invest $120 million in its Vietnamese subsidiary, Hyosung Vina Chemicals Co.

Hyosung Vina Chemicals is a company that makes propylene and polypropylene.

"The purpose of the investment is to improve its financial structure," Hyosung explained.

Hyosung Vina Chemicals posted a net loss of 313.7 billion won ($238 million) last year. The company's financial situation has deteriorated, with a total capital erosion as of the end of March this year. 

The poor performance of the Vietnamese subsidiary is leading to financial burden on the parent company, Hyosung Chemical. This company's debt-to-equity ratio reached 9940.6% on a consolidated basis at the end of March.

As it became difficult to support its subsidiary with its own cash, Hyosung Chemical raised funds by issuing commercial paper and bonds, significantly increasing the amount of borrowing. The company's net borrowings nearly doubled from 1.29 trillion won in 2019 to 2.52 trillion won recently.

Hyosung Chemical posted a net loss of 408.8 billion won in 2022.

Write to Seok-Cheol Choi at dolsoi@hankyung.com