'Additional Support' Doosan Heavy vs 'Existence Crisis' Ssangyong Motor... Two Restructuring Companies' Contrasting Fortunes

[Asia Economy Reporter Jo Gang-wook] The fortunes of Doosan Heavy Industries and Ssangyong Motor, both companies subject to restructuring, are diverging. Doosan Heavy Industries, which has already received 2.4 trillion won in support from the Korea Development Bank and the Export-Import Bank of Korea, is likely to receive an additional 1 trillion won in support next month. On the other hand, Ssangyong Motor, which is preparing to apply for the Industrial Stabilization Fund, faces uncertainty over support as there are concerns that it does not meet the eligibility criteria such as industry type.

According to financial circles on the 28th, as the creditors' due diligence on Doosan Heavy Industries and the entire Doosan Group is nearing completion, there is speculation that a normalization plan will be finalized along with additional financial support for Doosan Heavy Industries. It is pointed out that the government is highly likely to hold a meeting of ministers related to industrial competitiveness enhancement on the 29th to discuss the support details for Doosan Heavy Industries. The additional support amount is expected to exceed 1 trillion won. If the funds are disbursed, the total support for Doosan Heavy Industries will increase to 3.4 trillion won.

Doosan Heavy Industries must repay a total of 4.2 trillion won in borrowings this year. The creditors have so far injected a total of 2.4 trillion won into Doosan Heavy Industries to put out the immediate fire, but if the sale of Doosan Solus and others is delayed, additional financial support will be inevitable. The creditors previously stated that they would decide on additional support after reviewing the management normalization plan submitted by Doosan. Initially, the creditors including Doosan Group, KDB Industrial Bank, and the Export-Import Bank of Korea planned to finalize and announce the management normalization plan based on the due diligence results from Samil Accounting Corporation within this month. However, negotiations have not been concluded as the creditors and Doosan side continue a 'tug-of-war' over the sale targets and timing for normalization.

Earlier, Doosan Group submitted a self-rescue plan to the creditors aiming to secure more than 3 trillion won through capital increase, asset sales, and cost reduction. Since then, Doosan has been making every effort to secure liquidity through the sale of affiliates and assets. Doosan Solus, Doosan Tower, Club Mow CC, Doosan Construction, and Doosan Infracore have been mentioned or identified as potential sale targets. In addition, Doosan's core business units such as Industrial Vehicle BG, Electronics BG, Motrol BG, as well as Doosan Fuel Cell and Doosan Mecatec are also being discussed. Recently, rumors about the sale of the Doosan Bears baseball team have also surfaced.

Pawan Goenka, Chairman of SsangYong Motor's Board of Directors and President of Mahindra.
[Image source=Yonhap News]

Ssangyong Motor is reportedly planning to request support worth about 200 billion won from the Industrial Stabilization Fund, which will be launched in the afternoon. However, the likelihood of approval is uncertain. The government has already set basic conditions for support from the fund, including △ management difficulties due to COVID-19 △ total borrowings of 500 billion won or more △ at least 300 employees. The supported industries are currently limited to aviation and shipping. Moreover, since Ssangyong Motor is a company subject to restructuring, it may not align with the fund's purpose. Recently, the Korea Development Bank transferred Ssangyong Motor from its Corporate Finance Division 1 to the Corporate Restructuring Division 3 under the Restructuring Headquarters.

Son Byung-doo, Vice Chairman of the Financial Services Commission, also said on the 26th regarding whether Ssangyong Motor would be supported by the Industrial Stabilization Fund, "Since it is a company subject to restructuring, careful judgment is necessary." He added, "Support for the automobile industry through the fund should be discussed upon request from the Ministry of Trade, Industry and Energy. We have not yet taken a position on individual companies."

Ssangyong Motor is reportedly emphasizing that if it were not for the COVID-19 crisis, Mahindra's support would have proceeded as planned, enabling management normalization, and thus plans to apply for the fund. Also, since the main purpose of the Industrial Stabilization Fund is employment stability, Ssangyong Motor plans to highlight its efforts to reinstate laid-off workers and maintain employment.

Ssangyong Motor recorded an operating loss of 98.6 billion won and a net loss of 193.5 billion won in the first quarter of this year. This marks 13 consecutive quarters of operating losses since 2017. As of the end of March, borrowings reached approximately 390 billion won, with the Korea Development Bank debt being the largest at 190 billion won. The debt ratio and capital erosion rate for the first quarter were 755.6% and 71.9%, respectively.

This content was produced with the assistance of AI translation services.