Financially troubled Doosan Heavy Industries & Construction has started to prepare a restructuring plan after receiving one-trillion-won emergency funds from state-run banks.
The company’s reorganization plan includes the sale of Doosan Engineering & Construction, one of its affiliates. However, many industry insiders are skeptical about the possibility of its sell-off because the construction industry is slumping.
As of the end of 2019, Doosan E&C's cash and cash equivalents amounted to only 31.9 billion won, while its debt totaled 1.81 trillion won. Industry watchers say that it will take considerable time to find a new owner for the builder even if the sales process officially begins.
Accordingly, some experts point out that raising cash by liquidating Doosan E&C’s trade receivables (169.9 billion won) will be a more realistic method than selling off the entire company.
The creditors are turning their eyes to raising funds through Doosan Heavy’s other affiliates including Doosan Infracore and Bobcat, which are in better shape. They believe that Doosan Group needs to tear down the vertical ownership structure involving Doosan Corp., Doosan Heavy Industries & Construction, Doosan Infracore and Bobcat in order to smoothly raise funds. They note that if both Doosan Infracore and Bobcat remain under the control of Doosan Heavy, both companies will only suffer damage.
Analysts suggest two methods as possible solutions. One is leaving only Doosan E&C under the control of Doosan Heavy by dividing the parent company into an operation company and an investment company and merging the investment company with Doosan Corp. The other is that Doosan Corp. takes over a 36.27 percent stake in Doosan Infracore from Doosan Heavy Industries & Construction. However, both methods require shareholders’ agreement.