Failed IPO
As a smaller liquidity has been funneled into Doosan Bobcat Inc., a construction equipment unit of Doosan Group, than expected through the IPO, concerns over credit risks of affiliates of Doosan Group, including Doosan Infracore, are raising again.
According to investment banking industry sources on December 9, Doosan Corporation attracted effective demands worth as low as 30 billion won (US$25.58 million) in the demanding forecasting for 2-year corporate bonds worth 75 billion won (US$63.94 million) conducted on the previous day. Due to unsold bonds, the interest rate on bonds issuance is expected to set 50bp higher than the market-to-market interest rates, the highest level of the initial range for interest rates. According to the data from NICE Pricing & Information Inc., the market-to-market interest rate of Doosan Corporation’s 2-year corporate bonds stood at 3.545 percent as of the 9th.
With weaker-than-expected cash flow from Doosan Bobcat's IPO, Doosan Group’s affiliates saw their credit ratings downgraded. Doosan Bobcat’s listing fell far short of the initial expectation to inject more than 1 trillion won (US$852.51 million) into the affiliates. Doosan Infracore received 326.5 billion won (US$278.35 million) by selling a 10.9 percent stake in Doosan Bobcat, while Doosan Engine secured 38.1 billion won (US$32.48 million) with the sale of a 1.3 percent stake. Ryu Seung-hyup, a researcher at Korea Investors Service Inc., said, “When excluding adjustment and dividend of financial investors and commission for IPO organizers, Doosan Infracore was injected only 240 billion won (US$204.6 million). The figure is far short of 1.3 trillion won (US$1.11 billion) that needs to repay next year.”
Korea Investors Service cut its rating on Doosan Infracore to "BBB-" from "BBB" on the 8th, while NICE Information Service Co. lowered the rating outlook on Doosan Engine Co. from “stable” to “negative” and maintained its rating at “BBB+” on the 6th. In addition, all the rating outlooks on other Doosan Group’s affiliates with credit ratings are “negative.” Park Sae Young, senior researcher at NICE Information Service, said, “Doosan Group’s debts are still eight times higher than its earnings before interest, tax, depreciation and amortization (EBITDA), meaning heavy financial burden, despite cash flow from Doosan Bobcat's market listing.”