[Q&A] Export-Import Bank: "Doosan Heavy's Self-Rescue Plan to Be Finalized by Mid-Year"

[Asia Economy Reporter Kangwook Cho] On the 21st, the Export-Import Bank of Korea decided to convert Doosan Heavy Industries & Construction's $500 million foreign currency bonds into loans.

Additional support will be decided after comprehensively reviewing the self-rescue plan. The bank plans to finalize the self-rescue plan within the first half of the year.

Below are the main questions and answers regarding financial support for Doosan Heavy Industries & Construction.

- Does the loan support for repayment of Doosan Heavy Industries & Construction's foreign currency bonds imply that the creditor group, including the Korea Development Bank, will provide additional support to Doosan Heavy Industries & Construction in the future?

▶ The Export-Import Bank of Korea (hereinafter referred to as the bank) does not provide this support on the premise of additional support. It is intended as liquidity support for companies experiencing financial difficulties, such as maturity extensions, in line with the spirit of the "Financial Support Agreement for Overcoming the COVID-19 Crisis," signed on the 23rd of last month by 21 institutions including the Financial Services Commission, Financial Supervisory Service, Korea Federation of Banks, the bank, Korea Development Bank, and commercial banks.

Additional support will be decided after comprehensively reviewing the feasibility and executability of Doosan Group's financial restructuring plan (self-rescue plan) for the normalization of Doosan Heavy Industries & Construction's management, compliance with restructuring principles, the creditor group's financial burden and repayment possibility, and the impact on national key industries, in consultation with Doosan Group.

- What are the conditions of the loan for supporting the repayment of Doosan Heavy Industries & Construction's foreign currency public bonds? Is there a special reason for providing the repayment funds in Korean won despite the bonds being foreign currency public bonds? Will there be any market shock if Doosan Heavy Industries & Construction exchanges a large amount of Korean won at once?

▶ This loan is a Korean won loan with a loan period within one year (short-term), and the loan amount is 586.8 billion won.

The loan currency was set to Korean won at Doosan Heavy Industries & Construction's request. Doosan Heavy Industries & Construction has already entered into forward foreign exchange (F/X) contracts with six domestic commercial banks and other financial institutions to pay Korean won and receive foreign currency (dollars) for the maturity repayment of the $500 million foreign currency public bonds. According to the forward exchange contract terms, Doosan Heavy Industries & Construction plans to exchange foreign currency at a favorable exchange rate in the 1,170 won range compared to the current rate.

It is common for financial institutions that enter into forward exchange contracts with companies to hedge exchange rate risks by entering into opposite transactions with other financial institutions at the time of contract. Therefore, even if Doosan Heavy Industries & Construction exchanges currency all at once, it is expected that there will be no shock to the foreign exchange market.

- Various contents about the self-rescue plan are circulating in the market. Is it possible to confirm the contents of the self-rescue plan? If not, what is the minimum level required by the creditor group?

▶ As Doosan Group announced in a press release on the 13th, Doosan Group is currently reviewing all assets that can be sold or securitized for normalization and rapid financial restructuring related to the self-rescue plan.

The contents of the self-rescue plan are under consultation with Doosan Group, and we ask for your understanding that it cannot be disclosed at Doosan Group's request.

- What is the progress of due diligence and the future schedule, and when is the self-rescue plan expected to be finalized? When is the normalization of Doosan Heavy Industries & Construction expected?

▶ Due diligence is being conducted through professional consulting firms, comprehensively reviewing financial and operational due diligence, feasibility and executability of the self-rescue plan, repayment possibility, and impact on national key industries. Considering the time required for accurate and detailed verification, the final plan is expected to be confirmed within the first half of the year.

Since the management normalization plan has not yet been finalized, it is difficult to predict the normalization timing of Doosan Heavy Industries & Construction. However, in cooperation with the Korea Development Bank, we plan to manage the process without disruption to ensure Doosan Heavy Industries & Construction can normalize as soon as possible.

- Does the self-rescue plan include workforce restructuring? How does the company plan to resolve issues with the labor union?

▶ Doosan Heavy Industries & Construction has already been promoting workforce restructuring such as voluntary retirement since February (refer to Doosan Heavy Industries & Construction's disclosure dated March 11), and it is understood that the company is reviewing this at the corporate level.

- Is there a possibility that Doosan Heavy Industries & Construction will enter into a creditor group voluntary agreement?

▶ The creditor group plans to select the best option for Doosan Heavy Industries & Construction's management normalization by comprehensively judging the feasibility and executability of the self-rescue plan and the results of due diligence by professional consulting firms.

- Doosan Heavy Industries & Construction needs to repay about 4.2 trillion won this year. After the previously announced 1 trillion won and the recent approximately 600 billion won foreign currency bond repayment support, how much additional funding is required?

▶ Doosan Heavy Industries & Construction's marketable borrowings balance is about 1.2 trillion won. The amount of additional funding required is expected to be confirmed after due diligence is completed. Meanwhile, commercial banks are understood to be supporting the company by voluntarily refraining from collecting existing bonds and extending maturities to normalize the company.

- There is criticism that this is like "pouring water into a bottomless jar." Please explain the plan to recover the large-scale funds provided to Doosan Heavy Industries & Construction.

▶ We will closely review the feasibility of Doosan Group's self-rescue plan and the repayment possibility of the creditor group's support funds through due diligence. Through this, we will strive to ensure that the national policy bank's support funds are properly recovered and avoid criticism such as "pouring water into a bottomless jar."

- The Export-Import Bank of Korea's exposure to Doosan Heavy Industries & Construction is considerable. Are appropriate collaterals secured for this?

▶ For the emergency operating funds of 1 trillion won jointly supported with the Korea Development Bank (500 billion won from the Export-Import Bank), shares held by affiliates, the major shareholder (Doosan Corporation), and Doosan Heavy Industries & Construction were acquired as collateral to secure burden-sharing and responsibility fulfillment.

For existing credit support beyond the emergency operating funds of 1 trillion won, the bank has also secured substantial collateral such as real estate owned by Doosan Heavy Industries & Construction and shares of affiliates.

- To what extent has consultation been made with commercial banks regarding additional support?

▶ Commercial banks are understood to be supporting the company by voluntarily refraining from collecting existing bonds and extending maturities for normalization through the "Financial Support Agreement for Overcoming the COVID-19 Crisis" and creditor bank meetings hosted by the Korea Development Bank.

- The government announced that it will support capital increases for national policy banks supporting COVID-19 affected companies if necessary. Will the government support capital increases for losses incurred from supporting Doosan Heavy Industries & Construction?

▶ It is an important time for financial institutions such as the Export-Import Bank to play a role in supporting COVID-19 affected companies across all industries. We will consider requesting capital increases from the government if necessary.

The Export-Import Bank has prepared and is actively supporting an emergency financial support plan worth 20 trillion won, including extension of existing loan maturities (11.3 trillion won), new loans (6.2 trillion won), and guarantees (2.5 trillion won) for export-import and overseas expansion companies struggling due to COVID-19.

This content was produced with the assistance of AI translation services.