Disagreement Over Ssangyong Motor Acquisition Price... Ssangyong Motor Rehabilitation Process Extends Beyond New Year

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor and Edison Motors, which are about to sign a final M&A contract, are at a stalemate over the acquisition price. As the sale schedule is delayed, Ssangyong Motor's rehabilitation process is expected to extend beyond this year.

According to industry sources on the 12th, Edison Motors has demanded a reduction in the acquisition price, citing potential insolvency risks discovered during the detailed due diligence of Ssangyong Motor conducted over the past three weeks. Earlier, Edison Motors proposed an acquisition price of 310 billion KRW and was selected as the preferred bidder.

Under the corporate rehabilitation procedure, the acquirer and the acquisition target can negotiate to adjust the acquisition price by up to 5%, which in this case amounts to a reduction of up to 15.5 billion KRW. Edison plans to increase the company's capital by the amount reduced due to additional insolvency and use it as operating funds.

However, EY Han Young Accounting Corporation, the lead manager for the sale of Ssangyong Motor, reportedly holds the position that the acquisition price cannot be lowered to the maximum limit when considering the going concern value and liquidation value.

With the delay in signing the final contract, Ssangyong Motor's exit from the rehabilitation process is also expected to extend beyond this year. Ssangyong Motor had postponed the submission of the rehabilitation plan to January 1 of next year due to the sale process taking longer than initially expected. The rehabilitation plan must include specific acquisition price, investment amount and sources for normalization, and business plans.

The deadline for adjusting the acquisition price was extended from the 9th to the 13th of this month, but there are some who say it may be extended further. Edison Motors plans to raise approximately 490 billion to 530 billion KRW through the first round of paid-in capital increase and from financial investors (SI) and strategic investors (FI). Additionally, it plans to secure 700 billion to 800 billion KRW through asset-backed loans.

Another challenge Edison Motors must address is that the Korea Development Bank (KDB) is reluctant to provide loans, expressing doubts and insisting on verifying Edison Motors' electric vehicle business plan.

For Edison Motors to submit the rehabilitation plan to the court, it must set the repayment rate for rehabilitation claims and obtain the consent of at least two-thirds of the creditors, including the main creditor bank KDB and the Ssangyong Motor trade creditor group, through a creditors' meeting. A financial sector official said, "The Edison Motors consortium is reviewing the plan on the premise of accepting KDB's demands."

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