'Ssangyong Motor Facing Imminent Rehabilitation Proceedings... Key to Creating Going-Concern Value and Securing Investment'

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor is facing rehabilitation proceedings (court receivership) after failing to secure an investment decision from HAAH Automotive, which was considered a potential investor. For Ssangyong Motor to successfully complete the court receivership, it will be crucial to both enhance the company's going-concern value and find an appropriate investor.

According to the court and industry sources on the 10th, the Seoul Rehabilitation Court plans to decide whether to initiate rehabilitation proceedings after reviewing the opinion response from the Industrial Bank of Korea, Ssangyong Motor’s main creditor bank. If the court initiates the rehabilitation process, it will proceed with corporate value assessment, stakeholders' meetings, review of the company’s continuation, and the hearing and decision on the rehabilitation plan.

First and foremost, for Ssangyong Motor to revive, steadily increasing the going-concern value of the company is the most important factor. The court can arbitrarily declare bankruptcy if it judges that Ssangyong Motor has no rehabilitation value at any stage of the rehabilitation process.

Initially, Ssangyong Motor, which had fallen into capital erosion, chose asset revaluation as the fastest way to increase corporate value. This is because revaluing the factory land allows for a rapid increase in assets. The book value of Ssangyong Motor’s Pyeongtaek factory land was 402.57 billion KRW on the consolidated financial statements at the end of last year, but through asset revaluation, it increased to 681.37 billion KRW, generating a gain of 278.8 billion KRW. Having escaped capital erosion, Ssangyong Motor has filed an objection to the delisting procedure with the Korea Exchange and is expected to include the newly reflected value of the Pyeongtaek factory in the rehabilitation plan submitted to the court.

Even though Ssangyong Motor has escaped capital erosion, the revalued asset is the factory land necessary for future vehicle production, so it must increase sales through competitive new models. Accordingly, Ssangyong Motor launched the Rexton Sports & Khan on the 5th as a decisive move, selling about 1,300 units on the first day and attracting customer attention.

However, the business environment is turning unfavorable for Ssangyong Motor. Three days after launching the Rexton Sports & Khan, on the 8th, Ssangyong Motor halted production at the Pyeongtaek factory until the 16th of this month due to semiconductor supply issues. Earlier, in February, Ssangyong Motor had suspended production lines for all but three business days due to delivery refusals from some suppliers. The impact of that production halt extended into March, with sales volume dropping 23.5% compared to the same period last year. Continued production stoppages could again lead to delivery problems and decreased sales.

For Ssangyong Motor to avoid bankruptcy, new investors must also emerge. Although HAAH has not officially declared it will abandon the acquisition of Ssangyong Motor, HAAH’s financial investors (FIs) are reportedly burdened by the public claims amounting to about 370 billion KRW. Besides HAAH, Edison Motors, K-pop Motors, and Park Seok-jeon & Company have also expressed investment intentions.

Some speculate that while finding a buyer who can guarantee continuous investment in Ssangyong Motor, the company’s scale should be reduced through restructuring or debt relief. An industry insider said, "To save Ssangyong Motor, how much the creditors concede is important," adding, "Not only the creditors but also Ssangyong Motor employees have deferred about 20% of their wages since last year as a form of reduction, but additional cuts seem inevitable until fixed costs are reduced and the company returns to profitability."

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