Ssangyong Motor, which was in a liquidity crisis due to a deficit for 15 consecutive quarters, applied for corporate rehabilitation procedures (statutory management) to the Seoul Rehabilitation Court on the 21st. It has been 11 years since it applied for court management in 2009, right after the global financial crisis. The picture is the main gate of Ssangyong Motor’s production plant in Pyeongtaek, Gyeonggi-do. /Hankyung DB
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As Ssangyong Motors has applied for legal management (corporate rehabilitation procedures) after 11 years, concerns are growing that the ‘2009 nightmare’ will revive. However, it is analyzed that they applied for withholding the commencement of legal management, and that they struck Bae as much as all executives threw their resignations. The fate is expected to change depending on the results of negotiations with foreign banks and major shareholders during the period of pending legal management.
Will foreign banks lead to large shareholder support?
The primary reason for Ssangyong Motor’s application for court management on the 21st was that it could not repay the 60 billion won in foreign bank loans, which had expired on the 14th. By bank, JP Morgan 20 billion won, BNP Paribas 10 billion won, and BoA Merrill Lynch 30 billion won. On this day, the loans borrowed from the Korea Development Bank returned to the maturity of 90 billion won. Ssangyong Motor said on the 15th that “the management situation deteriorated and funds were insufficient.” “We are pushing for an extension of maturity.” However, Ssangyong Motor explained that he applied for court administration after failing to extend the maturity with a foreign bank.
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Just because the loan is overdue does not mean that you have to apply for court officials immediately. You can continue to negotiate with overdue interest. Until last week, it was known that Saneun had caught up with the extension of maturity. Ssangyong Motor, however, turned to court officials over the weekend and delivered the same plan to creditors.
Some analysts say that Ssangyong Motor’s filing for court management was aimed at foreign banks as well as India’s Mahindra Group, a major shareholder. Ssangyong Motor applied for court management on the same day and filed an application for withholding whether to start legal management. This is a system in which the court delays the start of court management by up to three months. It is a program that allows the company to operate normally due to the freeze of bonds and debts, and when the stakeholders agree to withdraw the legal management application during the hold period, the company returns to the normal company.
In a press release on the day, Ssangyong Motor said, “For the time being, free from the burden of repaying the principal and interest of loans, we agreed to adjust the interests with creditors and major shareholders during the period of pending legal management, and concluded negotiations with investors that are currently in progress, and requested to the court to withdraw from court management early Plan”. Ssangyong Motors explained that Mahindra will take responsibility as a major shareholder during the hold period and will actively cooperate in concluding negotiations with stakeholders.
If legal management is initiated due to the failure of the stakeholder agreement, the manager conducts due diligence and compares the liquidation value with the continuing enterprise value. If it is judged that the value of the going concern is high, creditors, shareholders, and executives and employees share the losses and then follow a plan to normalize management. In this case, foreign banks, Mahindra, are likely to lose more.
○ Sales plummeted to Corona 19
Ssangyong Motor’s strategy is in line with the movement of Mahindra, the major shareholder, to cut off funding and get out of hand despite the difficult business situation. Mahindra announced a new funding policy of 230 billion won in January this year, but in April it withdrew it and invested only 40 billion won.
Mahindra also heard the reason that the situation became difficult due to Corona 19, but the signal was strong, saying’Know and survive’ as we will end support for Ssangyong Motor.
Meanwhile, Ssangyong Motor, whose management rapidly deteriorated, managed to endure through the sale of assets, but was eventually designated as a management item. This is because Samjung Accounting Firm, who was in charge of Ssangyong Motor’s accounting audit, declined to submit an audit opinion on the 2Q report. Ssangyong Motor posted a deficit for 15 consecutive quarters through the third quarter. Samjung Accounting Firm rejected the audit opinion, saying, “There was an operating loss of 309 billion won, and current liabilities exceeded current assets of 5357 billion won” in the third quarter report.
An official from the creditors said, “Ssangyong Motor threw a rift of court management in order to seize the last chance to recover,” and said, “It is a pity that such a decision was made when domestic demand is revived due to the launch of the new Rexton.”
Ssangyong Motor also went through legal management procedures in 2009. Labor unions went on strike and police force was put in. In 2010, he met his new owner, Mahindra, and in 2011 he went through twists and turns of graduating from court officials.
Ssangyong Motors said, “I am very sorry to the people, including stakeholders such as business partners, sales networks, financial institutions, and employees,” and said, “Through an emergency meeting, all executives submit collective resignations, and to transform into a more robust and competitive company. I will do my best.”
Reporter Kim Il-gyu/Kang Kyung-min [email protected]
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