“Solid” Doosan Infracore, Bobcat may separate from parent to keep cash-strapped Doosan Heavy afloat

Doosan Heavy Industries & Construction is “under pressure to separate its subsidiaries Doosan Infracore and Doosan Bobcat in an effort to save the entire business group form a complete collapse,” says a Korea Times report.

The two subsidiaries are considered solid companies, says the paper. “The first step in a corporate restructuring is separating the target from solid companies,” said a Doosan Heavy source quoted by Korea Times.

In an effort to appease creditor concerns, the conglomerate is fine-tuning a “self-saving plan to meet creditors’ demands quite faithfully,” said a company official quoted by the paper.

With a debt at three times the value of inventory shares, combined with losing money last year, “the big risk is Doosan Heavy’s unstable capital structure,” says the paper.

The paper says Doosan Heavy is the largest stakeholder of Doosan Infracore, holding 36.28 percent. In turn, Infracore has a 51.05 percent stake in Doosan Bobcat. Because of this vertical ownership structure, Doosan Heavy’s credit risks can spread to the subsidiaries.

Restructuring could see the establishment of an investment company that will receive the parent’s equity in Doosan Infracore and Bobcat, thus shielding them from Doosan Heavy’s liquidity risks, says the paper. In another scenario, Doosan Corporation, which Doosan Infracore and Bobcat fall under, could purchase the parent’s equity position in the two firms. This would both help Doosan Heavy and free Doosan Infracore and Bobcat from risks.

Doosan Infracore North America and Doosan Bobcat separated their businesses on Jan. 1, 2018, after operating together for seven years. Doosan Infracore International purchased Bobcat in 2007.