Ssangyong Motor Receives Audit Opinion Disclaimer... Facing Delisting Crisis (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Lim Chun-han] Ssangyong Motor, struggling to enter short-term court receivership (P-Plan), has ultimately faced a refusal of audit opinion, pushing it to the brink of delisting. Due to liquidity shortages, Ssangyong Motor has decided to pay only 50% of employees' salaries for this month and next month.

According to the Financial Supervisory Service's electronic disclosure system on the 23rd, Ssangyong Motor submitted an audit report to the Korea Exchange for the 2020 fiscal year, in which Samjong Accounting Corporation issued a refusal of audit opinion. The auditor cited uncertainties regarding the company's ability to continue as a going concern and inappropriate opinions on the internal accounting control system as reasons for the refusal.

Samjong Accounting Corporation stated, "Due to deteriorating financial structure, operating losses of 449.4 billion KRW and net losses of 504.3 billion KRW occurred, and current liabilities exceed current assets by 781.8 billion KRW." It added, "The company has applied for the commencement of rehabilitation procedures and is conducting an ARS program for smooth consultations with creditors and potential investors. This situation raises significant doubts about the company's ability to continue as a going concern." Furthermore, it explained, "Although plans for fundraising and financial and management improvements are underway, if future events or changes in circumstances disrupt these plans, it may become difficult for the company to continue as a going concern, and the carrying amounts of consolidated assets and liabilities may not be recoverable or repayable through normal business operations."

According to Article 48 of the Korea Exchange's Securities Market Listing Regulations, if the audit opinion on the individual or consolidated financial statements for the most recent business year is adverse or a refusal, the exchange will delist the common stock in question. However, delisting may be deferred if the auditor submits a statement proving that the issue has been resolved before the start of organized trading.

The Korea Exchange announced on the same day, "Since Ssangyong Motor's stock meets the delisting criteria, the delisting process will proceed." The deadline for filing objections is April 13. Ssangyong Motor's shares are currently suspended from trading. Based on the consolidated financial statements at the end of last year, Ssangyong Motor's capital impairment ratio was 111.8%, indicating a state of complete capital erosion. Ssangyong Motor, which has posted losses every year since 2017, recorded an operating loss of 449.4 billion KRW last year, significantly increasing the deficit compared to 281.9 billion KRW in 2019. Last year's sales for Ssangyong Motor were 2.9502 trillion KRW, down 18.6% from the previous year.

Meanwhile, after negotiations with the labor union on the same day, Ssangyong Motor decided to pay only 50% of employees' wages for March and April and defer the remaining 50%. Previously, Ssangyong Motor had also deferred 50% of employee wages for January and February. Ssangyong Motor is effectively at a crossroads as the final investment decision by the major investor HAAH Automotive is delayed, and the Korea Development Bank demands "painful efforts" as a condition for support. HAAH Automotive is reportedly deliberating over Ssangyong Motor's business continuity and public bonds amounting to 370 billion KRW.

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