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The cash-starved Dongbu Group, the country’s 18th-largest conglomerate by assets, is at risk of falling into a deeper hole as its affiliates are likely to face hurdles in refinancing maturing debts following the failure of a deal to sell its key assets, analysts said Friday.
Dongbu, whose business portfolio ranges from insurance and construction to steelmaking, has been under pressure from its creditors to beef up its worsening financial status.
Late last year, Dongbu said it would raise 3 trillion won ($2.95 billion) by selling two of its key affiliates and other assets in a bid to improve its severe financial problems. But this week, its self-rescue efforts hit a stumbling block as POSCO, the nation’s biggest steelmaker, withdrew its bid for a steel mill under Dongbu Steel and Dongbu Power Dangjin Corp. POSCO’s withdrawal sparked concerns that Dongbu’s cash shortage may worsen, leading to a downgrade in credit ratings of its key affiliates such as Dongbu Engineering & Construction, Dongbu Metal and Dongbu CNI.
Their bonds were graded as “speculative,” meaning that they hold substantial risks of default.
Selling the flagship units is the key to Dongbu’s self-rescue plan, through which it hopes it will be able to get back on its feet.
“Dongbu’s financial risk may further worsen as its self-rescue plans are expected to be further delayed,” said Yoon Su-yong, an analyst at Korea Ratings, a local rating appraiser.
Dongbu’s manufacturing affiliates have to refinance or pay back maturing debts worth 220 billion won this year, half of which are due next month. But they have been suffering losses for the past few years with cash on hand waning.
Dongbu CNI said in a regulatory filing that it has decided to drop its plan to sell bonds worth 25 billion won to refinance 50 billion won worth of debts due next month, adding that it would repay the debt with its cash and other liquid assets.
“Given the current cash flow, the refinancing of maturing debts by Dongbu affiliates is not easy,” said an analyst at Samsung Securities, asking not to be named. “Some of them may file for court receivership.” (Yonhap)
Dongbu, whose business portfolio ranges from insurance and construction to steelmaking, has been under pressure from its creditors to beef up its worsening financial status.
Late last year, Dongbu said it would raise 3 trillion won ($2.95 billion) by selling two of its key affiliates and other assets in a bid to improve its severe financial problems. But this week, its self-rescue efforts hit a stumbling block as POSCO, the nation’s biggest steelmaker, withdrew its bid for a steel mill under Dongbu Steel and Dongbu Power Dangjin Corp. POSCO’s withdrawal sparked concerns that Dongbu’s cash shortage may worsen, leading to a downgrade in credit ratings of its key affiliates such as Dongbu Engineering & Construction, Dongbu Metal and Dongbu CNI.
Their bonds were graded as “speculative,” meaning that they hold substantial risks of default.
Selling the flagship units is the key to Dongbu’s self-rescue plan, through which it hopes it will be able to get back on its feet.
“Dongbu’s financial risk may further worsen as its self-rescue plans are expected to be further delayed,” said Yoon Su-yong, an analyst at Korea Ratings, a local rating appraiser.
Dongbu’s manufacturing affiliates have to refinance or pay back maturing debts worth 220 billion won this year, half of which are due next month. But they have been suffering losses for the past few years with cash on hand waning.
Dongbu CNI said in a regulatory filing that it has decided to drop its plan to sell bonds worth 25 billion won to refinance 50 billion won worth of debts due next month, adding that it would repay the debt with its cash and other liquid assets.
“Given the current cash flow, the refinancing of maturing debts by Dongbu affiliates is not easy,” said an analyst at Samsung Securities, asking not to be named. “Some of them may file for court receivership.” (Yonhap)
