[Funding] Doosan Construction Continues Future Accounts Receivable Securitization After Rights Offering

[Asia Economy Reporter Lim Jeong-su] Doosan Construction has securitized accounts receivable from future revenues through projects such as the Central Inland Line railway construction to raise funds. Although it barely overcame a liquidity crisis last year with a 250 billion KRW capital increase, its credit rating has not significantly recovered, leading it to rely on securitization of construction payments.

According to the investment banking (IB) industry on the 14th, Doosan Construction securitized construction accounts receivable with Kakao Pay Securities and Eugene Investment & Securities as lead managers. The underlying assets are payments for three road and railway line construction projects ordered by the Korea Rail Network Authority and the Korea Expressway Corporation.

Doosan Construction will receive approximately 280 billion KRW in total construction payments from the Korea Rail Network Authority and the Korea Expressway Corporation for three projects from May 2018 to June 2025. Among these, 65.3 billion KRW in construction payments to be received from February to December this year were used as the underlying assets. The amount of funds raised by Doosan Construction through this is about 40 billion KRW.

Investors will be repaid the principal and interest of the short-term bonds they invested in with the collected construction payments. However, if the construction is not properly carried out or for other reasons, and the construction payments are not received as planned, it becomes difficult to recover the bonds. To prepare for such risks, Doosan Construction provided joint guarantees on the borrowings. This means that if repayment of the securitized borrowings becomes difficult, the company is responsible for the debt.

An IB industry official said, "In the case of securitization of construction payments, there are often cases where fund recovery does not occur promptly due to the progress of work," adding, "In this securitization, since the ordering parties are public enterprises and authorities, there should be no issues in recovering the construction payments."

Doosan Construction resolved its liquidity crisis by receiving a 250 billion KRW capital increase at the end of last year. However, its credit rating has not improved enough to independently raise funds. Currently, Doosan Construction’s credit rating is rated B-.

With the capital increase, the major shareholder changed from Doosan Heavy Industries & Construction to ‘The Zeniths Holdings,’ reducing the possibility of group-level financial support. The Zeniths Holdings is a limited company established by the private equity firm Q Capital Partners to acquire shares of Doosan Construction. Through last year’s capital increase, The Zeniths Holdings came to hold 54% of Doosan Construction’s shares. The remaining 46% is held by Doosan Heavy Industries & Construction.

An IB industry official said, "Since the company has not yet recovered its ability to raise funds independently, it will have to rely on ultra-short-term borrowings or securitization of construction payments for refinancing borrowings or raising operating funds for the time being."

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