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(2nd LD) Cash-strapped Doosan to sell core construction equipment maker unit

All News 19:08 June 16, 2020

(ATTN: ADDS details in paras 6-7 and 12-13; RESTRUCTURES)

SEOUL, June 16 (Yonhap) -- Cash-strapped Doosan Group plans to sell its key construction equipment maker unit Doosan Infracore Co. as part of its self-rescue measures to receive financial support from creditor banks, industry sources said Tuesday.

South Korea's 15th-largest conglomerate is seeking to sell its shares and assets to improve its financial structure and repay debts held by the flagship unit Doosan Heavy Industries & Construction Co. in return for a 3.6 trillion-won (US$2.98 billion) lifeline from state-run banks.

The group plans to sell a 36.27 percent stake held by Doosan Heavy in Doosan Infracore as part of its self-rescue measures worth some 3 trillion won, according to financial industry sources.

Market watchers said the deal could fetch between 600 to 800 billion won. Credit Suisse will reportedly arrange the deal as a sales manager.

This file photo shows a Doosan Group logo in front of the group's building. (Yonhap)

In an effort to secure liquidity, Doosan Group has put its affiliates and assets, such as Doosan Solus Co., a copper foil maker for electric vehicles, and Doosan Tower, the group's headquarters building in Seoul, up for sale.

The group put sales of its cash-cow affiliate Doosan Infracore on the back burner when it came up with its asset sale plan, market watchers said.

However, the delayed sales of other affiliates, such as Doosan Solus, made the group include Doosan Infracore in its asset sale list, they said.

"As the process to sell units, including Doosan Solus, is becoming protracted, the group appears to have shifted its focus to Doosan Infracore," Lee Dong-hun, an analyst at Daishin Securities, said.

Doosan Group plans to split its troubled construction unit, Doosan Engineering & Construction Co., into two and to put the newly formed company, with highly valued assets, up for sale.

The sale of Doosan Engineering is part of the group's move to normalize its business. In March, Doosan Heavy acquired the construction firm.

Last week, group chairman Park Jeong-won said the conglomerate aims to raise 1 trillion won this year by selling shares and assets.

South Korea's leading power plant builder Doosan Heavy has faced a liquidity crisis due to its failed business reorganization and the poor financial health of the group's construction affiliate, Doosan Engineering & Construction.

It has been widely pointed that the power plant builder failed to keep pace with the times when the overall size of the global coal-fired power plant market has been contracting after the 2015 Paris climate change conference aimed to reduce global greenhouse gas emissions.

South Korea seeks to shift its energy policy from nuclear and fossil fuel-based power generation to renewable energy sources, such as solar power. The group is a key player in the commercial nuclear field.

Doosan Heavy swung to a net loss of 371.4 billion won in the first quarter from a year earlier due to increased one-off costs and losses from equity ties with Doosan Bobcat Co.

Shares of Doosan Infracore jumped the daily limit of 30 percent to close at 7,480 won on the main bourse. Stocks of Doosan Heavy jumped 10.4 percent to 5,150 won.

sooyeon@yna.co.kr
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