Hyundai Heavy Industries Holdings (HHI Holdings) appears likely to raise money from corporate bond markets in readiness for the possible acquisition of Doosan Infracore, and is also selling a minority stake in subsidiary Hyundai Global Service.
The firm has made a joint bid with Korea Development Bank Investment (KDBI) for 36.07% of Doosan Infracore, which is expected to be valued at about 800 billion won ($705 million). HHI Holdings had cash and cash equivalents of approximately 225 billion won at the end of June, making it seemingly inevitable that external financing will be needed.
HHI Holdings is also midway through the acquisition of Daewoo Shipbuilding & Marine Engineering, announced in March last year, with that deal now undergoing a regulatory review.
Market watchers believe HHI Holdings could probably get acquisition loans for the Doosan Infracore purchase at an interest rate of 4% or higher. In comparison, it recently issued 80 billion won worth of 3-year bonds at yields of 2.7% to 2.8% thanks to high demand from investors that have confidence in the company’s strong ‘A’- rating and stable outlook. It could opt to issue more bonds, as an excess issuance would not impact its credit rating, industry watchers said.
HHI Holdings could also use receipts from the sale of a minority stake in subsidiary Hyundai Global Service, which is expected to fetch several hundred billion won.
KDBI reportedly plans to launch a project fund for the potential acquisition of Doosan Infracore, though details will be available only after the preferred buyer is named.
Shortlisted bidders for the Doosan Infracore stake are performing due diligence and the final round of bidding is expected within the next couple of weeks. (Reporting by Hye-ran Kim)