Ssangyong Motor Seeking New Owner... Challenges Include Debt Restructuring and Loan Extensions

Mahindra "Sale to be completed by the end of next month"

[Image source=Yonhap News]

[Asia Economy Reporter Kiho Sung] Ssangyong Motor is making every effort to avoid the worst-case scenario of court receivership through the sale of the major shareholder's stake, but finding a new owner remains an uphill battle. This is because there are many hurdles to overcome in the process of selling the major shareholder's stake, such as capital reduction, investment scale, and loan maturity extension.

According to the automotive industry and Indian media on the 4th, Mahindra & Mahindra of India, which holds 74.7% of Ssangyong Motor's shares, plans to complete the ongoing stake sale by the end of next month. Since announcing the sale of Ssangyong Motor last year, Mahindra has been negotiating with the U.S. automotive distributor HAAH. Earlier, Mahindra Chairman Pawan Goenka said at a press conference on the 1st, "If the deal is successful, Ssangyong Motor will be with a new investor," adding, "Mahindra plans to reduce its stake to below about 30%, and will also proceed with a capital reduction of 25% allowed under the Reserve Bank of India (RBI) regulations."

Although Mahindra revealed a specific schedule related to the sale, there are many obstacles. First, the scale of the capital reduction is an issue. HAAH may demand more capital reduction to lower the price during the sale process. This is also related to the question of how HAAH, which has annual sales of only 25 billion KRW, can finance the acquisition amount.

How the Korea Development Bank-led creditors will act if the sale is successful is also crucial. For now, the creditors' stance is that they can consider additional support only when Ssangyong Motor secures a new investor and profitability improves. If the new investor demands loan maturity extensions or other conditions during the sale process, conflicts may arise. Additionally, since Chairman Goenka did not disclose the specific buyer at the press conference, the possibility of a new investor emerging cannot be ruled out.

It is also urgent to finalize negotiations with major parts suppliers who have stopped supplying parts. Currently, Ssangyong Motor is facing difficulties in factory operations as partners such as BorgWarner Ochang and Continental Automotive have stopped supplying parts, demanding 'cash payment.'

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