Ssangyong Motor Enters P-Plan: 'Success or Failure' Decision Expected Next Week

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] As the Reserve Bank of India has approved Mahindra's reduction of its stake in Ssangyong Motor, the decision on whether Ssangyong will enter the P-Plan (preliminary rehabilitation plan) is expected to be made by next week.

According to Ssangyong Motor and related industries on the 13th, Mahindra, the major shareholder holding 74.7% of Ssangyong Motor's shares, received approval from the Reserve Bank of India (RBI) for the reduction of its stake in Ssangyong Motor. Until now, the RBI had prohibited reductions exceeding 25% when domestic companies sell foreign investment shares, but this time it exceptionally approved a reduction exceeding 25%. This is interpreted as having overcome a hurdle in Ssangyong Motor's rehabilitation process.

Ssangyong Motor, which is negotiating investment with potential investor HAAH Automotive, is expected to complete preparations for entering the P-Plan as early as the beginning of next week and share the rehabilitation plan with all creditors to seek their consent.

After the court postponed the start date of the rehabilitation process, originally set for the 28th of last month, Ssangyong Motor has set a plan to complete the procedures for entering the P-Plan by mid-month. At that time, the court made this decision respecting the fact that Ssangyong Motor was conducting investment negotiations. Therefore, if the P-Plan entry fails due to difficulties in investment negotiations, the possibility of Ssangyong Motor entering court receivership increases, which could also lead to a chain bankruptcy of partner companies.

HAAH's investment decision and the Korea Development Bank's (KDB) determination will have a decisive influence on Ssangyong Motor's entry into the P-Plan. To enter the P-Plan, consent must be obtained from half of the creditors, including major corporate partners and the main creditor bank, KDB.

HAAH is demanding that KDB provide a corresponding amount of support on the condition that it invests $250 million (approximately 280 billion KRW) in Ssangyong Motor. HAAH is reportedly confident that after confirming Ssangyong Motor's safety and product competitiveness and establishing a dealer network in North America, it can sell 100,000 units annually. Furthermore, HAAH expects that if Ssangyong Motor launches the electric vehicle E100, which it is developing, this year, it could become a company with future value.

On the other hand, KDB's position is that HAAH's investment decision and the confirmation of a rehabilitation plan including a concrete business plan are priorities. Some in the industry have doubts about whether HAAH can sell 100,000 units of Ssangyong Motor vehicles in the North American market and whether it can bear the initial investment costs for electric vehicles.

Ssangyong Motor is reportedly maintaining steady contact with KDB to explain the rehabilitation plan. An industry insider said, "For Ssangyong Motor to receive not only financial support but also consent for the P-Plan, the approval of the main creditor bank, KDB, is absolutely necessary," adding, "It is understood that they are closely consulting with KDB regarding the investment negotiations with HAAH and the resulting rehabilitation plan."

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