Ssangyong Motor Faces Court Receivership Concerns Amid P-Plan Implementation Difficulties

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor is facing difficulties in advancing its P-Plan (Preliminary Rehabilitation Plan), raising concerns about entering court receivership. This is because the final investment decision by potential investor HAAH Automotive is being delayed.

According to industry sources and the court on the 28th, the Seoul Rehabilitation Court has requested Ssangyong Motor to submit a Letter of Intent (LOI) by the deadline of the 31st of this month, which is the correction order deadline. Although the LOI submission deadline is approaching, HAAH Automotive has not yet made an investment decision.

It is reported that HAAH Automotive is having difficulty persuading strategic investors (SI). HAAH's SI is one company in Canada, and the financial investors (FI) are two companies from the Middle East. Investors are reportedly burdened by Ssangyong Motor's large debt scale and the public claims amounting to 370 billion KRW.

The core of Ssangyong Motor's P-Plan is to reduce the major shareholder Mahindra's stake from 75% to 25% through capital reduction, and for HAAH to participate in a paid-in capital increase worth 250 million USD (approximately 280 billion KRW) to become the major shareholder.

Because of this, some have suggested that HAAH Automotive might acquire Ssangyong Motor after the debt scale is reduced through court receivership. Mahindra also acquired Ssangyong Motor during its court receivership at the end of 2010. Ssangyong Motor exited court receivership in 2011.

However, inside and outside the industry, this acquisition plan is seen as having very low feasibility. This is because if Ssangyong Motor enters court receivership, its network of partner companies is expected to be severed.

Previously, in December last year when Ssangyong Motor applied for rehabilitation and last month when it deferred promissory note payments, many partner companies stopped supplying parts.

If HAAH does not give a firm investment decision, the likelihood of Ssangyong Motor entering court receivership increases. However, the court is not expected to immediately initiate court receivership even if it does not receive the Letter of Intent by the 31st.

According to the Rehabilitation Act, the court must make a judgment to commence court receivership. Considering that investment negotiations have not been finalized and that restructuring will be inevitable after the commencement of court receivership, the opinions of major creditors are also expected to be heard.

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