Doosan Heavy on track to raise capital but will require more funds to repay debts – sources

17 September 2020

Cash-strapped Doosan Heavy Industries & Construction, the South Korean energy and industrial construction company, is on track to raise capital as part of its restructuring plan, but will need to raise more funds to repay debts, two sources familiar with the situation said.


  • KRW 1.3trn rights issue carries low risk of non-completion  
  • Sale of loss-making construction unit seen challenging, but effort continues


Cash-strapped Doosan Heavy Industries & Construction [KRX:034020], the South Korean energy and industrial construction company, is on track to raise capital as part of its restructuring plan, but will need to raise more funds to repay debts, two sources familiar with the situation said.


Its balance sheet will improve following the announced KRW 1.3trn (USD 1.1bn) rights issue, but the key to its deleveraging efforts lies in the successful sale of its 36.07% stake in Doosan Infracore [KRX:042670], South Korea’s largest construction equipment maker, the first and second sources noted. The controlling 36.07% stake sale is reported to be valued in the KRW 700bn to KRW 1trn range.


South Korean conglomerate Doosan Group has sold assets worth KRW 1.41trn in total this year, with only 13% of the proceeds allocated to Doosan Heavy, Mergermarket data shows.


Doosan Group and its family owners agreed with creditors, led by KDB, in June to begin a restructuring program to improve its financial structure subsequent to the KRW 3trn bailout for its flagship subsidiary Doosan Heavy earlier this year, according to Doosan Heavy’s rights issue prospectus published on 8 September. As a result, Doosan Group concluded a few asset sales and upcoming disposal targets include Doosan Infracore (36.07%) and Doosan E&C (100%), the filing said.


Doosan Heavy is currently rated BBB- negative by domestic credit rating agencies Korea Investors Services and Nice Investors Service. Of total borrowings of KRW 5.45trn as of 1H20 on a standalone basis, short-term borrowings amount to KRW 4.44trn, including KRW 4.13trn from state-owned lenders led by KDB.


While Doosan Heavy aims to repay debts on schedule, the borrowings from state-run lenders could be rolled over as well, said a company spokesperson.  


Shares of Doosan Heavy are trading at KRW 15,500 today, a 171% increase from the start of this year. 


December rights issue 


On 4 September, Doosan Heavy announced a KRW 1.3trn (USD 1.1bn) rights issue which is slated to complete in December. The proceeds will be used entirely to repay debts to KDB and The Export and Import Bank of Korea.


Doosan Heavy’s raise amount will be dependent on the share price and there is low risk of non-completion, a third source familiar with the situation said. Any subscription shortfall will be offered to public investors before undertaking by the bookrunners, the third source said, citing the disclosure.


Doosan Heavy said in the announcement that it would issue 121,495,330 new shares to its existing shareholders to raise approximately KRW 1.3trn. The issue price was tentatively set at KRW 10,700, applying a 20% discount. The price will be finalized on 30 November three days prior to the subscription date. The largest shareholder Doosan Corp, with a 44.86% stake, is set to subscribe. NH Investment & Securities and Korea Investment & Securities are bookrunners. 


Separately, the Doosan Group’s family owners are set to transfer their 24% stake in Doosan Fuel Cell [KRX: 336260], amounting to KRW 700bn, to Doosan Heavy by December.


Apart from Doosan Fuel Cell, unlisted chemical equipment manufacturer Doosan Mecatec is likely to remain within the group to support the main business, the first source said.  Doosan Fuel Cell and Doosan Mecatec were reportedly among sale candidates this year and local reports said in July that the group was pursuing the sale of Doosan Mecatec.


Announced deals 

Announced Date

Closing Date

Target Company

Bidder Company

Seller Company

Deal Value (KRW/bn) 



Doosan IMGB (99.92% Stake)

Societatea de Investitii Financiare Banat Crisana SA

Doosan Heavy Industries and Construction




Doosan Solus (40.88% Stake)

SkyLake Investment

Doosan Corporation

KRW 698.66bn



Doosan Corporation (hydraulic equipment business)

Socius – Well to Sea Investment consortium

Doosan Corporation

KRW 453bn



Neoplux (96.77% Stake)

Shinhan Financial Group

Doosan Corporation

KRW 73bn



Club Mow Golf Club

Hana Financial-MoaMiraedo Consortium

Doosan Heavy Industries and Construction

KRW 185bn


Potential targets  



Target Company

Seller Company

Latest Status 

Reported deal value 


Doosan Infracore (36.07%) 

Doosan Heavy Industries and Construction

Preliminary bids due on 22 September, local media reported on 5 September

KRW 700bn to KRW 1trn


Doosan E&C (100%)

Doosan Heavy Industries and Construction

It failed talks with preferred bidder Daewoo Development on 9 September

KRW 200bn


Doosan Bobcat (51%)

Doosan Infracore

Bobcat remains a disposable asset depending on the development of the group’s deleveraging plan, Mergermarket reported on 27 August

Market cap of KRW 2.7trn


Doosan Tower (100%)

Doosan Corp

Doosan is in advanced talks with Mastern Investment Management for possible Doosan Tower sale, a local report said in May

KRW 700bn

Doosan Infracore’s cyclical industrial operations have resulted in a narrow pool of potential bidders, but the business should be able to garner initial interest, this news service earlier reported. The contingent liability related to the legal suit involving its China unit could however impede the process, as reported.


The sale of leveraged and loss-making unit Doosan E&C will be challenging but the sale efforts will continue, the first source said. Doosan E&C, with a debt to equity ratio of 396.97% at June-end, recorded net losses of KRW 168bn in 1H20, widened from KRW 11.5bn as of 1H19.


Doosan Heavy has faced negative macro factors such as the sluggish shipping and shipbuilding industry for the last few years, according to the company’s 1H20 report. Moreover, the discontinuation of nuclear power plant projects triggered by the government’s new energy policy in 2019 has further deteriorated its business, the company disclosed. Its main businesses are manufacturing and construction of nuclear power plants, thermal power stations, turbines, desalination plants, and forgings.


Doosan Heavy recorded sales of KRW 7.4trn and operating profits of KRW 6.2bn in the first half of this year, down 4.7% and 99%, respectively, YoY.

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