Pocketing Its Pride

Doosan Infracore has lowered the initial public offering (IPO) price of Doosan Bobcat in order to list the company again.
Doosan Infracore has lowered the initial public offering (IPO) price of Doosan Bobcat in order to list the company again.

 

Doosan Infracore has pocketed its pride and lowered the initial public offering (IPO) price of Doosan Bobcat in order to list the company again. It is urgent for Doosan to restructure the group by making debt redemption through the IPO of Doosan Bobcat. 

Doosan announced on November 7 that it set the price of Doosan Bobcat’s IPO at 30,000 won (US$26.22) per share. Doosan Bobcat, which completed the book-building process last week, will be selling 6 million of its shares to individual investors for two days from the 8th, about 20 percent of the total shares.

Doosan Infracore, the largest shareholder of Doosan Bobcat, expected to raise nearly 1 trillion won (US$874.13 million) as it was seeking to launch the IPO of Doosan Bobcat last month. However, the company will be able to secure only a third of the money due to the lower initial offering price.

Doosan Bobcat previously made an attempt to list last month but decided to postpone it after the book-building showed demand for shares failed to reach expectations. Investment banking industry sources believe that the company failed to go public because the initial offering price is excessively high and there were too many shares being sold. Initially, Doosan Bobcat was hoping to sell its shares at a price range of 41,000 to 50,000 won (US$35.84 to 43.71) apiece, but a majority of institutional investors suggested the price range of 20,000 to 30,000 won (US$17.48 to 26.22), far lower than the bottom initial offering price range.

However, Doosan Group accepted the opinion of institutional investors. This is because it is desperate to undergo a restructuring program, including debt repayment. When it fails to list Doosan Bobcat for the second time, Doosan Group’s credit rating will be hardly hit.

After Doosan Infracore bought U.S.-based Bobcat for 4.5 trillion won (US$4.9 billion won) in 2007, it has run the compact construction equipment business in North America, Europe and China. However, the company has been struggled with both the burden of debts, which were used for the acquisition, and poor financial performance.

Doosan Infracore issued its consol bonds worth US$500 million (540 billion won) in 2012. With the bonds, the company was able to maintain its corporate credit rating but its interest charges have been mounting up. Since the consol bonds contain step-up provisions whereby the interest rates are continuously increased, the company need to spend more than 50 billion won (US$43.71 million) on interests alone by 2020.
 
Doosan Infracore reported 27.4 billion won (US$23.95 million) in consolidated operating profit and 859.5 billion won (US$751.31 million) in net loss including financial costs last year.

An official from the business industry said, “The period of Doosan Bobcat’s IPO and the improvement of financial structure through the IPO are important variables of Doosan Group’s credit ratings. Once the company fails to go public again, it will adversely affected the group’s credibility.”

 

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