Cash strapped SsangYong Motor Co. is understood to have made an advance payment of 140 million won ($123,806.15) required to start a prepackaged or standard bankruptcy procedure to Seoul’s bankruptcy court, according to Korean media reports.
This experts say is to fast track the sale process to the potential suitor HAAH Automotive Holding before the end of this month.
India’s central bank, The Reserve Bank of India, approved for capital reduction last week. The capital reduction in the cash strapped Ssangyong is necessary before Haah invests in it.
Mahindra & Mahindra’s 75 percent ownership in Ssangyong will reduce and HAAH Automotive Holdings is expected to become the largest shareholder with a 51 percent controlling stake by purchasing new shares worth $250 million.
However , anymore delay in the stake sale to HAAH Automotive, a US-based vehicle distributor that had sought to infuse $250 million (282 billion won) into the struggling automaker, would tip SsangYong closer to the bankruptcy process. HAAH was to infuse the funds on condition that KDB would infuse a similar amount. However, experts said that KDB has refused to put any more funds into SsangYong without a revival roadmap.
SsangYong’s creditors, which include KDB, would agree to the P plan only after the carmaker and the new investor agree on issues such as investments and the revival roadmap, say experts.
HAAH Automotive, on the other hand, believes that SsangYong would incur losses of around 600 billion won over the next two years before it starts the sale of SsangYong vehicles in the US.
Meanwhile, SsangYong is facing a sales decline and fewer operational days at its Pyeongtaek plant.
There are also indications that KDB demanded SsangYong’s labour union to extend the validity period of the collective agreement and ban strikes as a prerequisite for financial support.
SsangYong filed for court receivership in December 2020, and the court decided the autonomous restructuring support (ARS) programme before putting it under rehabilitation. The rehabilitation process is basically debt readjustment, which may include restructuring of workforce.
Mahindra had earlier decided to shelve its plans to infuse $400 million equity in SsangYong. Mahindra had paid Rs 2,100 crore, or $463 million, for the purchase of SsangYong a decade ago.