Doosan Faces Urgent Need for Additional Self-Rescue Plans Amid Consecutive Credit Rating Downgrades

[Asia Economy Reporter Changhwan Lee] Credit rating agencies are consecutively downgrading the credit ratings of major affiliates of the Doosan Group. Despite receiving large-scale government financial support, the group’s financial burden remains heavy, centered on Doosan Heavy Industries & Construction, and there is uncertainty regarding the speed and results of financial improvement efforts. It is pointed out that the self-help plan must be accelerated to prevent further downgrades.

According to the credit rating industry on the 4th, Korea Ratings completed the regular evaluation of Doosan Group affiliates on the 30th of last month and downgraded the credit ratings of Doosan, Doosan Fuel Cell, Doosan Heavy Industries & Construction, and Doosan Engineering & Construction. Doosan Infracore’s rating outlook was changed from stable to negative.

Korea Ratings assessed the situation of Doosan Heavy Industries & Construction as the most serious. It diagnosed that the weakening of the business base due to a decrease in orders caused by the government’s energy transition policy was the greatest concern. It expressed worries about deteriorating financial stability and poor performance. The credit rating was lowered from BBB to BBB-.

As the core affiliate Doosan Heavy Industries & Construction faces difficulties, concerns about the holding company Doosan have also increased. Its credit rating dropped from A- to BBB+. This reflects the deterioration of financial stability due to Doosan providing large collateral as Doosan Heavy Industries & Construction borrowed funds, as well as concerns about further credit deterioration of Doosan Heavy Industries & Construction.

Doosan Engineering & Construction fell from BB to BB-. Despite improved operating performance, the downgrade reflects heavy financial burdens, ongoing liquidity risks, and the overall credit deterioration of the group.

Doosan Infracore maintained its BBB credit rating but its rating outlook was downgraded from stable to negative. This is explained as reflecting the possibility of changes in the burden of affiliate support and potential changes in the group’s overall governance and Doosan Infracore’s business and financial structure.

Previously, both NICE Investors Service and Korea Investors Service also downgraded the credit ratings of Doosan, Doosan Heavy Industries & Construction, Doosan Fuel Cell, and Doosan Engineering & Construction, meaning all three major domestic credit rating agencies have lowered the creditworthiness of Doosan’s key affiliates. A decline in creditworthiness makes it difficult for companies to raise funds and increases interest expenses, placing a significant burden on management.

Credit rating agencies believe that if Doosan Heavy Industries & Construction’s financial restructuring plan proceeds quickly, the overall sense of crisis within the group will also diminish. Assets slated for sale, including Club Mow CC, Doosan Solus, Doosan Tower, and Doosan Fuel Cell, need to be sold quickly to improve Doosan Heavy Industries & Construction’s financial structure, which could lead to normalization of its credit rating.

A Korea Investors Service official stated, "The success of Doosan’s planned non-core asset sales within this year will determine whether a large-scale paid-in capital increase for Doosan Heavy Industries & Construction can be achieved, and whether Doosan Heavy Industries & Construction can improve its profitability through its own restructuring and business reorganization is a key issue for improving Doosan’s credit rating."

A Korea Ratings official also pointed out, "If the financial restructuring plan for Doosan Heavy Industries & Construction, which is being promoted at the group level, proceeds smoothly, the downward pressure on the credit ratings of Doosan and Doosan Heavy Industries & Construction will be alleviated."

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