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| A gas turbine that Doosan Heavy Industries & Construction developed. / Courtesy of Doosan Heavy |
By Nam Hyun-woo
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| Doosan Heavy Industries & Construction CEO Park Gee-won. |
However, questions remain whether Doosan Heavy can be salvaged, because the company is yet to come up with viable self-restructuring plans. The state-run lenders also appear to be upset because the Doosan Group unit revealed the aid before the banks and government had made an official decision.
Doosan Heavy said in its regulatory posting on Thursday that it signed a loan agreement worth 1 trillion won with the KDB and the Eximbank. The loan will be provided as a line of credit, which allows the company to draw and repay any amount up to the limit.
For this, Doosan Heavy said its largest shareholder and holding firm Doosan Corp. would offer its stakes in Doosan Heavy and real estate assets worth 1.2 trillion won as collateral.
The support came amid Doosan Heavy's faltering profitability and precarious financial situation.
Doosan Heavy logged a 495.2 billion won net loss last year after its nuclear power equipment business collapsed amid the Moon Jae-in administration's policy to phase out nuclear power. Also, the company's financial structure was aggravated because it has given support worth 1.7 trillion won to its ailing subsidiary, Doosan Engineering & Construction, over the past 10 years.
Facing a liquidity crunch, the company cut jobs and placed a significant portion of its employees on furlough, but is still loaded with debt worth 5.9 trillion won. Of these, 1.2 trillion won will be due at the end of this year.
"Doosan Heavy has been striving to improve its financial structure through various efforts, but faced difficulties because the financial market was strained due to the COVID-19 outbreak," Doosan Heavy said in a statement. "With the support, our plan for financial structure improvement will pick up momentum, and we will repay this loan as soon as possible."
Along with the 1 trillion won support, Doosan Heavy has already asked Eximbank to convert corporate bonds worth 600 billion won to a loan. The bonds are set to expire next month.
As more firms reel from the COVID-19 pandemic, the government earlier this week announced a plan to help companies repay corporate bonds by having state-run lenders directly buy 80 percent of subjected corporate bonds. Because this significantly lowers firms' financial burden, Doosan Heavy's 600 billion won bond has been mentioned as in relation to this relief program.
However, questions still remain over the company and its nuclear power-centric portfolio.
"Mid- and long-term growth momentum remains for Doosan Heavy over its nuclear decommissioning, mid- and small-size reactor, gas turbine and wind power, but it seems the company still has a long way to go," said Daishin Securities analyst Lee Dong-heon.
Korea Investors Service (KIS) Thursday downgraded Doosan Heavy's credit outlook to BBB Possible Downgrade from BBB Negative, despite the 1 trillion won plan.
"Although the company is making various efforts to improve its financial structure, it is yet to show a viable outcome," said KIS analyst Jeong Ik-su. "Unless there are massive improvements in the short term, the company's credit rating will inevitably be downgraded."
Doubts also remain over the value of the collateral Doosan Corp. is set to provide. Doosan Corp. holds a 44.86 percent stake in Doosan Heavy, whose value was only 370.2 billion won as of Thursday.
The KDB and the Eximbank are also angry about the company's hasty announcement.
Immediately After Doosan Heavy revealed the 1 trillion won aid, both lenders said "nothing has been confirmed," and Doosan Heavy changed its regulatory posting hours later stating "it held a board meeting to apply for a 1 trillion won loan to the banks and sign the deal."
According to industry sources, the government would hold a ministerial meeting on Friday and discuss the aid to Doosan Heavy. Any such support plan was supposed to be revealed after economy-related ministers approved it at the meeting.
During the ministerial meeting, the ministers ― the Minister of Economy and Finance, Minister of Trade, Industry and Energy and the Financial Services Commission Chairman ― gave their approval for the plan.
