Ssyangyong Motor's Rehabilitation Process Extends Beyond Year-End... Challenges Continue into First Half of Next Year

Disagreement Over Inclusion of Management Participation Clause
Prolonged Negotiations with Edison Motors

Procedures Remain Even After M&A Completion
Operational Normalization Expected in 2023

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor's rehabilitation process, which has faced difficulties from the selection of the preferred bidder to the final contract, has extended beyond the year. Contrary to the court and Ssangyong Motor's expectations that normalization would occur by the third quarter of this year, negotiations with Edison Motors have prolonged, making it uncertain whether the rehabilitation process will be completed by the first half of next year.

According to industry sources on the 31st, Ssangyong Motor and the preferred bidder, Edison Motors Consortium, are engaged in a tug-of-war over whether to include a management participation clause from Edison Motors' side. Edison Motors insists that since they are investing 309.8 billion KRW to acquire Ssangyong Motor and plan to invest an additional approximately 1.5 trillion KRW, they must verify Ssangyong Motor's business plan and the use of investment funds. On the other hand, Ssangyong Motor is reportedly opposing this, viewing it as management interference.

An industry insider stated, "Unlike typical M&A where all statuses as an acquirer are confirmed upon signing the investment contract before the approval of the rehabilitation process, if the rehabilitation plan is not approved, the investment contract can be nullified. Therefore, Ssangyong Motor is unable to accept this."

Additionally, Edison Motors is said to have caused backlash by requesting various research and development (R&D) materials from Ssangyong Motor. As Ssangyong Motor and Edison Motors have failed to narrow their differences, the deadline for the contract and deposit payment, originally set for the 27th, has been extended to January 10 of next year.

All M&A schedules, including the selection of the preferred bidder, due diligence period, and final contract, are falling short of the court's expected pace, making it unlikely that Ssangyong Motor's situation will improve next year. Initially, when Ssangyong Motor entered the rehabilitation process in April, the plan was to finalize the rehabilitation plan by July 1, hold a creditors' meeting, and close the case. However, even after the M&A is concluded, the submission of the rehabilitation plan, creditors' meetings related to rehabilitation, and court approval procedures remain, so operational normalization is expected only in 2023.

Recently, every plan proposed by Edison Motors has been blocked by the Korea Development Bank and Pyeongtaek City, leading some in the financial sector and industry to cautiously predict that the Ssangyong Motor M&A might fail. A financial sector official said, "Even within the Edison Motors Consortium, opinions differ regarding the Korea Development Bank's demand for third-party verification," adding, "Financial investors believe that to maintain trust, they must comply with the Korea Development Bank's demands."

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