Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
SsangYong receivership to speed up HAAH's acquisition
SsangYong Motor's new Rexton / Courtesy of SsangYong Motor
By Nam Hyun-woo
By Nam Hyun-woo
SsangYong Motor's decision to file for court receivership is expected to help the ailing carmaker speed up the process of finding a new owner, according to industry officials, Tuesday.
Current owner Mahindra & Mahindra of India is in protracted talks with U.S. vehicle distributor HAAH Automotive to sell its stake in the company. After SsangYong's decision, Mahindra has softened its stance, increasing the chances of an agreement being reached in the near future, the officials said.
With the filing, SsangYong also applied for an autonomous restructuring support (ARS) program with the court. If the court approves this, the company will have three months to address its financial problems before a court-led restructuring process takes effect.
Sources said the receivership means SsangYong and Mahindra acknowledged that the Korean affiliate has no ability to stay afloat by itself, thus they will use the next three months to reach an agreement with HAAH or find another buyer.
“The receivership request appears to be a decision made by Mahindra, because SsangYong's board is controlled by Mahindra, and its main creditor the Korea Development Bank (KDB) said it did not discuss the matter,” a source familiar with SsangYong's financial status said. “As receivership will depreciate SsangYong's value and Mahindra okayed this, it shows the Indian firm has become more receptive to HAAH's demands.”
HAAH was said to have offered $258 million for a part of Mahindra's 75 percent stake in SsangYong, but Mahindra was seeking to sell all its shares to make a clean exit from Korea.
However, as Mahindra chose a path that will likely dilute SsangYong's value, the Indian automaker apparently changed its mind to be more open to HAAH's offer, the source said.
Shares of SsangYong Motor are currently suspended from trading on the Korea Exchange following the receivership. On Monday they declined 19.24 percent from the last trading session on the receivership news, which will allow HAAH to acquire the stake at a cheaper cost.
“Mahindra has said that it will take the responsibility as the largest stakeholder of SsangYong and make efforts to reach an agreement with an interested party promptly,” SsangYong Motor said.
Industry officials noted that the KDB's role will remain important whether HAAH acquires SsangYong or not, because the automaker's main creditor will cushion the impact of the upcoming restructuring.
“Whether SsangYong goes into court-led restructuring or is acquired by a new investor, restructuring of the company's current business seems inevitable, as will be the extra damage to SsangYong suppliers,” an official at a domestic carmaker said. “This will become a headache for the KDB.”
SsangYong has more than 5,000 employees and 240 suppliers across the country. The number of employees at the suppliers is believed to be surpassing 50,000.