'1 Trillion Won Loan' Doosan Heavy Industries Plans to Sell Doosan Construction as Part of Self-Rescue Plan

On the 27th, the Doosan Tower building in Dongdaemun-gu, Seoul, is visible as the government decided to inject 1.6 trillion won into Doosan Heavy Industries, which is experiencing financial difficulties, through the Korea Development Bank and the Export-Import Bank of Korea. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ki-min Lee] Doosan Heavy Industries & Construction has begun the process of selling its wholly-owned subsidiary, Doosan Construction.

According to business circles on the 31st, Doosan Heavy Industries recently distributed an investment teaser letter for the sale of Doosan Construction. Doosan Construction had continued to incur losses and was delisted last year before becoming a subsidiary of Doosan Heavy Industries.

The sale of Doosan Construction is analyzed as a measure arising from the sense of urgency that a convincing self-help plan must be prepared before the state-run banks, Korea Development Bank and Export-Import Bank of Korea, provide 1 trillion won in support to Doosan Heavy Industries.

On the 27th, when the 1 trillion won support was decided, Korea Development Bank stated, “We decided to support Doosan Heavy Industries on the condition of thorough pain-sharing and responsibility fulfillment by the group’s head and major shareholder, Doosan Co., Ltd., and self-help efforts.” Accordingly, the state-run banks took shares of Doosan Co., Ltd. and major affiliates held by the Doosan Group’s head family as collateral for the loan. They also plan to decide on additional support depending on whether Doosan Heavy Industries presents further self-help measures.

In addition to the sale of Doosan Construction, the Doosan Group is reviewing additional liquidity securing measures. At Doosan Heavy Industries’ regular shareholders’ meeting held the previous day, part of the articles of incorporation was amended to resolve the funding difficulties. Proposals to increase the total number of shares from 400 million to 2 billion, a fivefold increase with a fixed par value of 5,000 won per share, and to expand the issuance limits of convertible bonds (CB) and bonds with warrants (BW) from under 500 billion won to about 2 trillion won each were passed.

However, a Doosan Heavy Industries official said, “The sale of Doosan Construction has not been decided, and we plan to promote restructuring measures in consultation with creditors.”