No shortage of work for Doosan Group’s new chairmanIt has been less than a month since Park Jeong-won was named the new chairman of Doosan Group, but it looks like there’s already plenty for him to take care of when it comes to key affiliates.
The group’s construction arm is in most need of help. According to Doosan Heavy Industries on Monday, the company has planned to acquire redeemable convertible preference shares (RCPS) worth about 400 billion won ($345 million) that were issued by Doosan Engineering & Construction (E&C) in 2013 so that Doosan Heavy can sign a deal delaying the expiration date of the RCPS for two or three years.
The company added that it will try to sell the RCPS later on. If it fails to sell them completely, it will keep the unsold shares.
Doosan Heavy was surety for the construction arm to attract investors to purchase the RCPS, but it is expected to buy them as the possibility is high that Doosan E&C shareholders might exercise their right to seek repayment on their investment in RCPS, since Doosan Heavy’s credit rating has been lowered from A to A- by NICE Holdings on Sunday. Along with Doosan Heavy, the credit ratings of four other Doosan affiliates, including Doosan Infracore, Doosan E&C and Doosan Engine, fell by one level due to the group’s financial instability.
“The overall business competitiveness of Doosan Heavy is great, and it is capable of creating profits, but it has burdens that it should share with other affiliates such as Infracore and E&C,” a NICE spokesman said in a statement.
The total debt of Doosan E&C was 1.3 trillion won as of December, and it needs to repay 430.1 billion won of that this year. Doosan Group has been supporting the construction arm by issuing new stocks and giving it projects, but that hasn’t been enough to keep the company in the green.
Doosan Group said there will be investors who would purchase the RCPS as Doosan Heavy was able to show improved sales lately, meaning that its credit rating could get better in the future, and because the RCPS generally offer higher returns than normal stocks.
“We expect worries about Doosan E&C’s financial status will shrink after the RCPS are sold,” a Doosan Group spokesman said. “The work of improving financial structures on Doosan Corporation will likely be wrapped up when we finish selling Doosan Defense System & Technology.”
As part of the financial improvements, Doosan Infracore’s U.S.-based affiliate, Doosan Bobcat, has signed a deal giving its authority to buy and sell the company’s shares to JPMorgan and Korea Investment & Securities on Monday as it prepares to float the company on the Korean stock market between August and September.
“Since this is the very first case in which a global company has been able to trade on the Korean market, it will help to improve Infracore’s financial conditions,” a Korea Exchange spokesman said.
BY KWON SANG-SOO [email@example.com]