In the P plan, the ownership ratio (currently 75%) was significantly lowered through the reduction of stakes in Mahindra, India, and the new owner, HAAH Automotive, a US automobile distribution company, participated in a capital increase of 250 million dollars to secure 51% of the shares. It is known to contain content.
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The Korea Development Bank announced on the 31st that Ssangyong Motor’s P plan was “planned to be reviewed when a formal request is received.” Ssangyong Motor plans to apply for a P plan after signing an investment contract with HAAH Automotive in early February.
As the P plan must be accompanied by the consent of the creditors, the possibility of a success is still confused. There is an analysis that the fate of Ssangyong Motor depends on the choice of KDB Development Bank that reflects the government’s intention.
In order to introduce the’P plan’, more than half of the creditors must agree
On December 21 of last year, Ssangyong Motors entered the corporate rehabilitation procedure of the autonomous restructuring (ARS) method. Since then, the four major shareholders Mahindra, HAAH Automotive, Ssangyong Motor, and Saneun, have been negotiating for the sale of Ssangyong Motor, but it collapsed when Mahindra withdrew. Mahindra wanted to sell all of its 74.7% stake, and HAAH and others asked for a certain stake until Ssangyong’s normalization, but could not find a contact point.
As part of the corporate rehabilitation process, the P plan incorporates the financial sector’s workout method (company improvement work) with the court’s compulsory debt adjustment. The biggest difference from the general court-led rehabilitation procedure is that creditors can lead the rehabilitation plan.
In order for Ssangyong Motor to enter the P plan, more than half of all bonds must obtain the consent of creditors. It is known that 60% of Ssangyong Motor’s debt, which is currently worth KRW 1 trillion, was accounted for by commerce creditors, and about 20%, respectively, by KDB and foreign financial institutions.
It is known that HAAH Automotive is also requesting a significant amount of new funds from the Korea Bank. It is reported that the funds invested by HAAH Automotive will be used for Ssangyong Motor’s future strategies such as new car development, and the KDB should support operating funds.
Saneun, burdened with large additional inputs… Difficulties in agreement with partner companies
KDB believes that Ssangyong Motor should have a business plan with a guarantee of sustainability. In addition, Sangeun Lee, Dong-geul, emphasized that the two items suggested to the labor union as conditions for supporting new funds should be implemented. This is the content that the union extends the collective agreement cycle from the current three years to one year, and does not engage in any strike or other industrial action until normalization, such as a turnaround. The labor and management of Ssangyong Motors has not yet given a concrete answer to the conditions raised by KDB.
The KDB has emphasized the three main principles of restructuring: △the responsible role of major shareholders, △sharing the pain of stakeholders, and △sustainable normalization measures. This is because the burden of investing a large amount of new money by the simple creditor, while the majority shareholder Mahindra has left.
It is also difficult to obtain consent from creditors such as business partners. On the 28th, Ssangyong Motor’s president Ye Byung-tae received the consent of small and medium-sized business partners to apply for the P plan at the emergency response committee meeting of business partners. However, it is said that additional persuasion work is necessary for the partners of large companies. When Ssangyong Motors applied for ARS (autonomous restructuring support), five large companies’ partners refused to pay for parts.
Damage to business partners… Discussing government support decisions
Ssangyong Motor recorded an operating loss of 4235 billion won last year. The size of the operating loss increased by 50.2% from 281.9 billion won in 2019. As of the end of last year, the capital was -622 billion won, which is currently in a state of complete capital erosion (108.3%).
If even the P plan, which is the last resort, is destroyed, there is concern that damage such as a massive unemployment situation and a chain bankruptcy of business partners will become snowballed. Accordingly, it is observed that the main creditor bank, the Bank of Korea, will be forced to provide support in some way.
An official from the financial sector said, “A government-level decision is expected to be made such as a meeting of ministers related to strengthening industrial competitiveness on the Ssangyong Motor issue on the 29th.” First, the government decided to implement emergency financial support through policy financial institutions in order to prevent the liquidity crisis of Ssangyong Motor parts suppliers.