Doosan Heavy seeks state bank loans

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Doosan Heavy seeks state bank loans

Cash-strapped Doosan Heavy Industries & Construction has applied for a 1 trillion won ($815 million) loan from state-run banks.

The Korea Development Bank and the Export-Import Bank of Korea would take Doosan Corporation’s shares of Doosan Heavy Industries and real estate assets as collateral for the loan. The nuclear and other power station manufacturing company is in separate talks with lenders for support on the refinancing of 600 billion won worth of maturing foreign debt.

Doosan Corporation is the largest shareholder of Doosan Heavy Industries, with a 34.4 percent stake. Doosan Heavy Industries said it was forced to apply for bank loans despite its own efforts to improve finances due to new difficulties in the market from the coronavirus outbreak.

The company has lost money for six consecutive years since 2014 as its main plant building business struggled despite income from subsidiaries and investments. During that period, Doosan Heavy Industries accumulated net losses of 2.68 trillion won.

Doosan Heavy Industries mainly relies on its nuclear power plant business for profit. Because of the cancellation of a number of projects under the Moon Jae-in administration, the company says it lost around 10 trillion won in possible contracts domestically.

Korea Investors Service (KIS) cut Doosan Heavy’s credit ratings from BBB+ to BBB- in May last year. In January the KIS issued a BBB+ rating for Doosan Corporation, citing the weakened credit rating of Doosan Heavy and financial condition of Doosan Heavy subsidiaries.

In response to the financial difficulty and lack of orders, Doosan Heavy Industries was asking its 6,700 employees to go on leave with reduced pay.

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