Gong is with Ssangyong… If the rehabilitation plan is not realistic, the possibility of bankruptcy

Input 2021.02.02 18:01

Korea Development Bank Ssangyong Motor (003620)Ssangyong’s future became more uncertain as it officially confirmed that the sale of the US HAAH, known as a potential investor, with Mahindra & Mahindra, India’s largest shareholder, was broken. The pre-packaged plan, a short-term legal manager based on the premise of the sale of shares in Mahindra, also revealed that it is not acceptable, and Ssangyong Motor is likely to go through legal management procedures again. Major restructuring is difficult to avoid, and in the worst case, the possibility of bankruptcy is raised.

Sang-Hyun Choi, senior vice-president of Ssangyong Motor’s main creditor bank, San Eun, said on the 2nd that it is difficult to proceed with further negotiations through the Investment Promotion Council as the disagreement between potential investors and Mahindra has not narrowed. Ssangyong Motor, which applied to the court in December of last year for a corporate rehabilitation procedure and an autonomous restructuring support (ABS) program, tried to find new investors for the past two months, but as a result, it means that it failed. HAAH, a subsidiary of Cherry Motors in China, has been discussing a plan to acquire a stake in Ssangyong Motors owned by Mahindra.

Saneun explained that it is not easy to proceed with the P plan. Byung-tae Yee, CEO of Ssangyong Motor, held a meeting with the emergency response committee of Ssangyong Motor’s partner companies on the 28th of last month and said, “The sale negotiations broke down, so we went to the P plan.” Consultation is necessary, but Ssangyong Motor is in the process of preparing a related business plan, and potential investors have left the country without making a final decision due to the delay in submitting Ssangyong Motor data.”

Accordingly, it is highly likely that Ssangyong Motor will eventually be judged by the court whether the company’s’recovery’ value is high or the’liquidation’ value is high. The rehabilitation process is directed toward saving the enterprise as much as possible, but in the worst case, there is a possibility that the court will file bankruptcy.

The ball was passed to Ssangyong. This is because a specific business plan must be submitted to prove that the regeneration value of continued operations is higher than the company liquidation value. Ahn Young-gyu, vice president of the industry sector, said, “I know that potential investors plan to receive proof of financing (LOC) from financial investors (LP) when Ssangyong Motor’s rehabilitation plan is prepared.”

However, the situation is not easy. This is because there is no card capable of reversing the business situation in a short period of time amid continued sluggish sales. Instead, it is highly likely that Ssangyong Motor will come up with a large-scale restructuring plan to reduce the cumulative deficit by drastically reducing manpower and costs.

If the situation turns dramatically and HAAH returns to the negotiating table, or if a new investment negotiator appears, the situation may improve, but the industry estimates that it is realistically difficult to expect it. In addition, HAAH requested the KDB for additional funding of a similar scale on the premise of a paid-in capital increase of $250 million (280 billion won), but failed to provide evidence such as how to secure funds for the capital increase, the KDB said.

In the worst case, it could lead to bankruptcy. If the court determines that the rehabilitation plan submitted by Ssangyong Motor is not realistic, it can be declared bankrupt. This is because the court has no choice but to consider the situation in which Ssangyong Motor, which received court administration in 2009, applied for court administration again after 11 years.

Meanwhile, the Bank of Korea made it clear that it would not invest in new funds without securing a strategic investor (SI). Senior Vice President Choi said, “In order to normalize Ssangyong’s management, it is necessary to attract SI with a high understanding of the automobile industry. We will provide funding only if Ssangyong Motors attracts SI and the business plan is recognized as valid.” Still, Sangeun pointed out, “It is not possible to save money just by putting money in companies whose accumulated deficit has exceeded 1 trillion won over the past 10 years.”