South Korea’s Doosan Heavy Industries & Construction Co. may study demerging Doosan Infracore Co. and Doosan Bobcat Inc. to protect the sound units from sharing the troubles of the plant equipment maker.

According to sources, one feasible reorganization scheme under study is to separate Doosan Heavy into two investment and business entities to have the company retain just equity interests in Doosan Infracore and Doosan Bobcat and leave just wholly-owned Doosan Engineering & Construction under its arm.

Selling the construction unit to reduce debt cannot be a plausible option, givien the builder’s debt level and the slump in the construction industry. Doosan E&C’s debt amounted to 1.8 trillion won ($1.5 billion) as of the end of last year, with cashable assets at a mere 31.9 billion won.

Doosan Heavy is under pressure to restructure after it received emergency loan of 1 trillion won from state lenders last month.

The scheme can prevent the troubles of Doosan Heavy from spilling over to the healthier companies and keep them viable to raise capital on their own.

But seeing through the plan is easier said than done.

Under the Korean holding law, a company must transform into holding structure if its asset reaches more than 500 billion won and its subsidiaries contribute more than 50 percent to the asset in value. Doosan Corp. has assets of 4.75 trillion won of which its subsidiaries account for 2.14 trillion won, or about 45 percent. Doosan Corp. would have to transform into a holding entity to keep Doosan Infracore under its arm if its value goes above 50 percent.

Doosan Heavy holds a 36.3 percent stake in Doosan Infracore, which is valued at 1.5 trillion won.

Doosan Heavy, once unrivalled nuclear reactor equipment provider, has faced liquidity woes due to cease in reactor construction under the government’s policy to phase out of nuclear fuel. Two state lenders – Korea Development Bank (KDB) and Export-Import Bank of Korea (EXIMbank) – extended a 1 trillion won worth emergency credit line to the firm.

By Noh Hyun and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]