Dong Geol San, Chairman of Korea Development Bank, "If Doosan Heavy fails to normalize, major shareholders will be held accountable"

Lee Dong-geol (left), Chairman of KDB Industrial Bank, and Sohn Tae-seung, CEO of Woori Bank, are attending a meeting between the Financial Services Commission Chairman and bank CEOs held at the Bankers' Hall in Jung-gu, Seoul on the 20th, sharing their opinions. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kangwook Cho] Lee Dong-geol, Chairman of the Korea Development Bank (KDB), stated, "If the normalization of Doosan Heavy Industries & Construction does not succeed, we will hold the major shareholders fully accountable."

According to financial sources on the 29th, Chairman Lee said regarding the emergency 1 trillion won capital injection by KDB and the Export-Import Bank of Korea into Doosan Heavy Industries & Construction, "This support is provided on the premise of pain-sharing by major shareholders and others."

KDB emphasized that this support is based on the previously established restructuring principles, which require stakeholders to share the burden. In particular, affiliated companies and major shareholders must take responsibility first, and the parent company Doosan, employees, and other creditor financial institutions must also share the pain fairly.

Accordingly, Chairman Lee's remarks can be interpreted as a kind of warning message that, in the worst-case scenario, if Doosan Heavy Industries & Construction fails to normalize despite the policy banks' financial support, the Doosan family’s shares pledged as collateral could be confiscated.

The Doosan Group has provided shares and real estate held by its affiliates as collateral. Shares with value such as Doosan Solus, Doosan Fuel Cell, and Doosan Mecatec, along with Doosan Tower, are expected to be used as collateral. Especially, since about 32 third- and fourth-generation members of the Doosan owners hold shares that will be pledged as collateral, KDB expects Doosan to devise various self-help measures and make responsible efforts for early business normalization.

According to KDB, Doosan Heavy Industries & Construction has faced increasing difficulties since the 17th, as the issuance of electronic short-term bonds and commercial paper (CP) has been virtually blocked. Of the 4.9 trillion won in bank borrowings, over 4 trillion won is due this year.

KDB stated, "The decision to provide policy financial support was inevitable." Regarding the possibility of additional support, they maintained the position that "a high-intensity self-rescue plan must be prepared first."