Just three years ago, Doosan Group was struggling with management difficulties, but its recent performance has led to a more positive evaluation.
By shifting its focus from construction and heavy industry to future-oriented industries such as semiconductors, secondary batteries, robots, renewable energy, and small modular reactors (SMRs), the company has significantly improved its standing in the market.
Doosan subsidiaries’ corporate bonds are in high demand. Although the holding company, Doosan, has a credit rating of BBB, the market interest rate for their bonds is recognized at A+. Doosan subsidiaries that need funding are being dubbed ‘BBB with an A grade’ and are attracting significant interest from investors.
According to industry insiders, on July. 3, Doosan Fuel Cell (BBB) conducted a demand forecast for institutional investors to issue corporate bonds worth up to 80 billion won ($57.9 million) which far exceeded the planned amount. The issuance was divided into 1.5-year bonds ($10.8 million) and 2-year bonds ($18.1 million), and attracted $36.2 million and $141.2 million in funds, respectively.
They offered interest rates based on the average interest rate of private bond evaluation companies (±30bp, with 1bp = 0.01 percentage points), and secured the funding at -75bp for the 1.5-year bonds and -86bp for the 2-year bonds. This means many investors were willing to buy Doosan Fuel Cell bonds at a higher price than the market evaluated.
Given the high demand, Doosan Fuel Cell decided to increase the issuance to $23.8 million for the 1.5-year bonds, and $34 million for the 2-year bonds, issuing a total of $57.9 million. Compared to the recent average interest rate for Doosan Fuel Cell, the interest rate for this bond issuance is expected to be in the mid 4% range.
Last month, the holding company Doosan (rated BBB) also saw strong demand in its corporate bond offering. It issued $14.4 million in 1.5-year bonds and also the same amountin 2-year bonds, but received orders totaling $183.2 million. The bonds were issued at interest rates much lower than expected, at -95 basis points for the 1.5-year bonds and -90 basis points for the 2-year bonds.
The recent upgrade of Doosan’s credit rating from BBB to BBB+ just before the bond issuance also contributed to the successful outcome. On Jun. 19, Korea Ratings Corporation first upgraded Doosan’s credit rating. Although other credit rating agencies have not yet adjusted their ratings, creating a credit rating split, it is highly likely that they will follow suit and upgrade their ratings as well.
Although the credit ratings of Doosan subsidiaries are at BBB, the interest rates at which they issue bonds are effectively recognized as A grade. This is a significant change for Doosan.
Due to financial difficulties in 2020, Doosan entered a creditor management system and only exited it in February 2022. At that time, the Doosan Group’s total financial debt was about $13.3 billion (debt ratio of 327.7%). Through strong restructuring measures, including asset sales, capital increases, and cost reductions, Doosan was even evaluated as a ‘model student’ in restructuring.
Recently, there has been a demand to secure Doosan subsidiaries’ corporate bonds, even at a premium. In particular, high-yield funds, which aim for priority allocation of IPO stocks by holding BBB-grade corporate bonds, are targeting the corporate bonds issued by Doosan subsidiaries. Industry insiders say that Doosan is taking over the spot of Korean Air, whose credit rating recently rose from BBB to A, as a stable BBB-grade bond.
