As of Feb. 28, Doosan Heavy Industries & Construction successfully wrapped up a creditor management program under an MOU for a financial structure improvement between creditors and Doosan Group.
One year and 11 months had passed since Doosan Heavy Industries & Construction requested emergency funds from two state-run Korean banks - Korea Development Bank (KDB) and the Export-Import Bank of Korea (Korea Eximbank).
KDB and Korea Eximbank quickly provided 3 trillion won in emergency funds as priming water for the company’s restructuring. Doosan Group honored commitments to creditors and successfully completed the restructuring in a short period of time.
Doosan Heavy Industries & Construction faced a liquidity issue as its financial structure deteriorated due to sluggish business performances in the traditional power generation sector, such as coal-fired power generation and a financial market crunch triggered by the COVID-19 pandemic in early 2020.
Considering the negative effects of Doosan Heavy Industries & Construction’s insolvency on the overall Korean economy, KDB made a presentation on how to normalize the management of the contractor in March and May to seek pan-government cooperation.
At the same time, Doosan Heavy Industries & Construction began its management normalization work with three principles - Doosan Group and its affiliates’ sincere roles, employees sharing pain and sustainable normalization measures.
At the time of reviewing the restructuring plan for Doosan Heavy Industries & Construction, the number of domestic and foreign bond financial institutions was large, and the proportion of marketable loans, such as private commercial papers (CPs) was high.
KDB, Korea Eximbank and Doosan Group mapped out a financial structure improvement and self-rescue plan to sequentially sell off group assets, such as those held by affiliates and expand Doosan Heavy Industries & Construction’s capital and financially signed the MOU in June 2020.
The self-rescue plan included the sale of Doosan Tower, the headquarters of Doosan Group, the sale of affiliates such as Doosan Infracore and Doosan Solus, participation in an paid-in capital increase by Doosan Heavy Industries & Construction, in-kind investment, a cut in the number of employees and a wage freeze.
Doosan Group has successfully implemented most of its plan including the sale of a total of 3.1 trillion won in assets during the MOU implementation period and a capital increase of 1.15 trillion won completed on February 18, 2022, analysts say.
As a result of financial diagnosis by external specialized institutions on financial structure improvement and future business prospects, Doosan Heavy Industries & Construction’s financial structure has recovered to a level where it can manage itself on its own.
The creditors made the early decision to terminate the MOU on Doosan Heavy Industries & Construction by taking into account not only traditional standards such as improving financial indicators but the importance of Doosan Heavy Industries & Construction as a leading company in the energy sector.
Creditors drew up a plan to reorganize its business into a future-oriented one which concentrates on eco-friendly and renewable energy through consulting shortly after providing three trillion won in emergency funds and have monitored the progress in the implementation of the plan.
When reviewing the closure of the MOU, KDB checked prospects for the company in new renewable energy fields such as gas turbines, next-generation nuclear power plants (small modular reactors and nuclear plant dismantlement), hydrogen energy and offshore wind power generation.
“Doosan Heavy Industries & Construction not only overcame its liquidity crisis but also seized a golden opportunity to start anew with a future business structure,” the creditors said.
Under its restructuring principles, KDB will steadily push for a paradigm shift to restore competitiveness in Korea’s industrial ecosystems and carry out restructurings with a focus on the market with the utilization of funds from the private sector such as M&A deals.
_산업은행장 이동걸.jpg)
