[Funding] Doosan Issues Option-Linked Bonds with Early Redemption Possible

Call Option Exercisable from 6 Months After Issuance
Redemption Expected Upon Successful Execution of Doosan Solus Sale and Other Self-Rescue Plans

[Asia Economy Reporter Lim Jeong-su] Doosan, the holding company of Doosan Group, is raising funds by issuing high-interest rate option bonds. It is interpreted that the plan is to repay the urgent borrowings immediately with the raised funds and to repay the option bonds when cash inflows occur through self-help plans such as affiliate sales.

According to the investment banking (IB) industry on the 24th, Doosan issued option bonds worth 20 billion KRW under the management of Kyobo Securities. The maturity is 3 years with an interest rate of 5.633%. Previously, in June, it also issued option bonds worth 50 billion KRW. The maturity was 3 years with an interest rate of 5.651%. In one month, it raised a total of 70 billion KRW through option bonds in two rounds.

Doosan issued 75 billion KRW worth of public bonds in February this year and did not issue corporate bonds for about four months before returning to the bond market. The tightening of the funding market due to the novel coronavirus infection (COVID-19) and the failure of self-help plans adversely affected fund raising.

The option bonds issued by Doosan include a call option that allows the issuer to redeem early. Doosan can decide the redemption timing from six months after the bond issuance until the day before maturity. The option bonds issued in July can be redeemed from January next year, and those issued in June can be redeemed from December this year.

It is known that the put option, which allows option bond investors to demand early redemption from Doosan, is not attached. An IB industry official explained, "Bonds with call options have relatively higher interest rates because the issuer has the option to freely decide the redemption timing."

Doosan’s issuance of option bonds is interpreted as a bridge loan to repay existing borrowings. An industry insider said, "It appears that Doosan is issuing option bonds to prioritize repaying urgent borrowings first and plans to repay the bonds first when cash comes in through the implementation of self-help plans."

Doosan has signed a special agreement with creditors to secure more than 1 trillion KRW in cash within the year through asset sales and to raise capital worth 3 trillion KRW over three years. The self-help plan according to the agreement has recently started to accelerate. Its subsidiary, Doosan Heavy Industries & Construction, decided to sell the 27-hole golf course Club Mow CC for 185 billion KRW.

Doosan has also signed a memorandum of understanding (MOU) with Skylake, known as the fund of Jin Dae-je, regarding the sale of Doosan Solus. The price for 100% of Doosan Solus shares held by Doosan and the owner family is expected to be around 700 billion KRW. Doosan Group’s headquarters building, Doosan Tower in Dongdaemun, Seoul, is also in sale negotiations with the real estate management company Maston Investment Management. Doosan Construction and others also plan to pursue sales within the year.

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