Negative Impact
Earlier on February 27, Doosan Heavy Industries & Construction Co. resolved to issue 500 billion won (US$430 million) worth of bonds with warrants or BWs in a board meeting.
A BW refers to a bond issued with a right to claim a certain number or amount of new shares issued by a company at a price set before within a certain period after the issuance of the bond.
Its issuance method is a public offering method which places top priority on shareholders. The bond matures in five years, and bondholders' advanced redemption right (put option) can be exercised three years after the issuance.
The exercise of pre-emptive rights can be made from one month after the issuance of the bond to one month before its expiration date, and its exercise price can be re-fixed at up to 80% of its definite exercise price. The subscription date is April 24 and the payment date May 4. Bondholders will be able to exercise their rights from June 4.
"Doosan Heavy Industries & Construction Co. suffered from big losses, giving rise to an earnings shock in the fourth quarter of last year. The earnings shock is making investors concerned about this financing plan,” said Jung Dong-Ik, a researcher at KB Securities. “Doosan Heavy Industries & Construction Co. stated that funds raised via the issuance of BWs will be used for investment in R&D activities such as for securing original gas turbine technology, the realization of digital factories and investment in facilities in the nuclear power generation sector and other purposes.
It is forecast that the issuance of BWs will lead to a 15.8% increase in the number of the company’s current shares, which will have a negative impact on its share price in the short term.