Struggling Ssangyong Motor Partners on the Brink... Urging KDB for Early Fund Disbursement

P Plan Partners Face Growing Bankruptcy Risk Before Operation
Support Requested After This Week's Internal Meeting

[Asia Economy Reporters Sunmi Park, Changhwan Lee, Gimin Lee] Partner companies facing bankruptcy due to not receiving proper payment from Ssangyong Motor have urged KDB Industrial Bank to provide financial support to resolve the situation. There is a sense of crisis that parts suppliers will go bankrupt before the pre-restructuring plan (P-Plan) prepared by Ssangyong Motor takes effect.

According to the automotive industry on the 1st, the Ssangyong Motor Cooperative Emergency Response Committee, composed of about 350 Ssangyong Motor partner companies, decided to request priority support for Ssangyong Motor from the Industrial Bank after internal meetings this week. The cooperative consists of small and medium-sized automotive parts companies, and it is understood that many member companies are facing bankruptcy due to Ssangyong Motor’s failure to pay parts fees amid management difficulties.

A representative of the cooperative said, "Since Ssangyong Motor has promised financial support of $250 million from HAAH through the P-Plan, we plan to request the Industrial Bank to expedite the disbursement of support funds to prevent a chain bankruptcy of partner companies," adding, "As Ssangyong Motor has deferred payment of promissory notes, the situation of partner companies will worsen."

Ssangyong Motor recorded an operating loss of 423.5 billion KRW last year, resulting in full capital erosion. The deficit increased by 50% compared to the previous year. The Korea Exchange warned that if Ssangyong Motor fails to submit evidence of resolving the full capital erosion by the deadline of March 31, the company could face delisting. With support from the major shareholder cut off, Ssangyong Motor has deferred employee salaries and promissory note payments to partner companies due to lack of cash.

Ssangyong Motor Preparing P-Plan, Industrial Bank to Review Support

Ssangyong Motor is preparing a P-Plan after the sale negotiations between the major shareholder, India’s Mahindra, and the key investor, HAAH Automotive, broke down. The P-Plan, a short-term court management plan submitted in advance, can reduce the time required for rehabilitation compared to general court management.

The P-Plan is expected to include a capital reduction of Mahindra’s 75% stake, followed by a $250 million paid-in capital increase through which HAAH Automotive will become the new major shareholder.

However, HAAH Automotive reportedly demands matching financial support from the main creditor bank, the Industrial Bank. The cooperative’s position is that if the Industrial Bank decides to support Ssangyong Motor, it should promptly disburse funds to prevent partner companies from going bankrupt.

Nonetheless, several variables remain before the P-Plan is submitted to the court. According to the Debtor Rehabilitation Act, Ssangyong Motor needs the consent of creditors holding more than half of the debtor’s liabilities to enter the P-Plan. Currently, about 60% of Ssangyong Motor’s current liabilities are trade payables, while the Industrial Bank and foreign financial institutions hold the remaining claims.

The Industrial Bank stated that it will immediately begin review once Ssangyong Motor prepares a pre-plan for the P-Plan and presents it for negotiation. However, since Ssangyong Motor must include future business plans, the scale of required funds, and procurement methods in the pre-plan, it is expected to take some time before an official negotiation request is made.

An Industrial Bank official said, "If Ssangyong Motor requests negotiations, we will focus primarily on the business viability, including whether continuous management is possible," adding, "This includes demands presented by Chairman Dong-geol Lee to the labor union to extend the validity period of the collective agreement from one year to three years and to suspend all disputes until profitability is achieved."

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