Law, decision to withhold the commencement of corporate rehabilitation procedures
Ssangyong Motor’s 15th consecutive quarter of deficit… shutdown crisis
KB Capital’s “We will respond while watching the situation”
Ssangyong Motor, facing a liquidity crisis, applied for autonomous restructuring assistance (ARS), and the industry is paying attention to the direction of SY Auto Capital, which was jointly funded with KB Capital.
According to law enforcement officials on the 29th, the Seoul Rehabilitation Court withheld the start of Ssangyong Motor’s corporate rehabilitation procedures and accepted the ARS application. ARS is a system that delays the start of court management for up to three months after the court confirms the intentions of the creditors. During that period, Ssangyong Motor can discuss restructuring issues autonomously with major creditors while operating normally.
With the ARS program in operation, the court will decide whether to proceed with rehabilitation at the end of February next year. The Ministry of Justice said, “The decision on whether to commence rehabilitation procedures in this case will be withheld until February 28, 2021 to support consultations on restructuring between debtors and creditors.”
Ssangyong Motor plans to reach an agreement between major creditors and other stakeholders during the holding period. It is planning to adjust with the goal of normalizing the operation of the factory.
The key variable is the supply of parts. Some of the parts makers are refusing to supply delivery because of the liquidity crisis. If the parts-related negotiations are not resolved smoothly, the plant will be shut down from early next year. They are in crisis without even starting ARS. In the worst case, it is also predicted that Ssangyong Motor may go through bankruptcy procedures before reviving the company.
Accordingly, the key is whether SY Auto Capital, which was established jointly with KB Capital, operates. The industry dominates the prospect that if the Ssangyong Motor crisis continues, the business will be liquidated.
SY Auto Capital, established in 2015 at a ratio of 49% (KB Capital) to 51% (Ssangyong Motor), is a Ssangyong Motors exclusive capital company that exclusively provided financial services such as vehicle purchase and installment payments to customers who purchase Ssangyong Motor vehicles.
A KB Capital official said in a call with this magazine, “As ARS progresses, the factory that was stopped first has decided to resume operation by the end of the year,” and “We will respond while watching the self-restructuring situation.”
Meanwhile, Ssangyong Motor recorded a deficit for 15 consecutive quarters from the first quarter of 2017 to the third quarter of this year. The capital erosion rate reached 86.9% as of the end of the third quarter. The debt repayment is also overdue. As of the 22nd, only the loan principal overdue amounted to 255.3 billion won. In fact, there is no clear progress, with the observation that there is no ability to pay off debts on their own.
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