Doosan Heavy Industries and Construction is under pressure to separate its subsidiaries, Doosan Infracore and Doosan Bobcat, in an effort to save the entire business from collapsing, according to The Korea Times.
Doosan Heavy Industries and Construction, the flagship unit of Doosan Group, is facing a liquidity crunch as weak orders and financial losses continue. According to the article, the company’s debt is at three times the value of its investors’ shares and operations losing money last year. The company is also heavily loaded in debt, has shown weak cash flow, and will be required to repay $597.8 million in bond debt this year.
Doosan Group is currently in the process of fine-tuning its self-salvage plan, the report states, and plans to submit it to its creditors. President Moon Jae-in’s drive to phase out nuclear power plants has also been cited as one of the core factors hurting the firm.
Doosan Heavy is the largest stakeholder of Infracore, according to the article, with 36.28 percent. Infracore has 51.05 percent stake in Bobcat, thus creating a vertical shareholding structure starting from Doosan Heavy. Because of this, Doosan Heavy’s credit risks are feared to spread to the subsidiaries.
In one scenario of separating Doosan Heavy and Doosan Infracore, the group will create a new investment company that will receive Doosan Heavy’s equity in Infracore and Bobcat. In another, Doosan Corp. would directly purchase Doosan Heavy’s ownership share in the two subsidiaries through rights issuing, allowing Doosan Corp. to support Doosan Heavy.
Source: The Korea Times