Ssangyong Motor Overcomes Hurdle with 'Mahindra Potato Approval'... KDB's Support Key to 'P-Plan'

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor announced on the 11th that the Reserve Bank of India (RBI) recently approved a capital reduction for Mahindra, which holds a 75% stake in Ssangyong Motor. With this RBI approval, Ssangyong has overcome a major hurdle in the procedure to enter the P-Plan (pre-restructuring plan) following the sale of shares. However, voices both inside and outside Ssangyong emphasize that support from the main creditor bank, the Korea Development Bank (KDB), is crucial to proceed with the P-Plan.

On the same day, Ssangyong stated, "We have officially received the document from the RBI approving Mahindra's capital reduction of its stake in Ssangyong Motor." Previously, the RBI had effectively opposed the move, citing regulations that require domestic companies to hold at least 25% of shares when selling overseas holdings.

Ssangyong explained, "Despite the RBI's regulation that disallows capital reductions below 25% when domestic companies sell foreign investment shares, the RBI exceptionally approved a capital reduction exceeding 25%."

Leveraging this RBI approval, Ssangyong plans to sign an investment contract with potential investor HAAH Automotive and share the restructuring plan with all creditors to obtain consent for the P-Plan.

The P-Plan reportedly includes reducing the major shareholder Mahindra's stake through capital reduction and having HAAH participate in a paid-in capital increase worth $250 million (approximately 280 billion KRW), thereby becoming the major shareholder (51%). Internally, Ssangyong aims to complete preparations to enter the P-Plan by mid-month.

However, it remains uncertain whether HAAH will finalize the acquisition of Ssangyong. Currently, HAAH is reportedly hesitant due to the burden of public interest bonds amounting to 370 billion KRW.

Furthermore, for the schedule to proceed as planned, not only investment negotiations with HAAH Automotive but also decisive action from KDB is essential.

HAAH also believes that KDB should provide financial support comparable to the investment amount to help normalize Ssangyong's management.

Currently, Ssangyong is known to be in continuous contact with KDB, explaining the restructuring plan.

The court, considering that the investment contract with HAAH is underway and that restructuring procedures have not yet begun, indicates that if the P-Plan fails, Ssangyong is highly likely to enter court receivership.

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