Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
KDB says no fresh funding for SsangYong Motor until potential investor shows up
Korea Development Bank Vice President Choi Dae-hyun speaks during an online press conference, Tuesday. / Courtesy of Korea Development Bank
By Baek Byung-yeul
By Baek Byung-yeul
Moves to rescue SsangYong Motor have hit a major snag as its main lender, the state-run Korea Development Bank (KDB), has made it clear there will be no fresh funding aid until the debt-ridden carmaker finds a potential investor.
“Since SsangYong Motor was placed under an autonomous restructuring support (ARS) program in December, three parties, including SsangYong Motor, KDB and Mahindra & Mahindra, have been trying to attract new investors. However there has been no progress in selling SsangYong, because Mahindra and SsangYong's potential buyer have failed to narrow their differences,” Choi Dae-hyun, vice president of KDB, told reporters.
“SsangYong is still coming up with a detailed self-rescue plan, while a potential buyer departed Korea and there has been no progress in completing the prepackaged bankruptcy program,” he added. “We will make a final decision (on financial support) after checking a potential investor's willingness to inject money and after reviewing the feasibility of SsangYong's business plan”
SsangYong was placed under the ARS program to find new investors and prevent a court-led restructuring process after suffering 15-consecutive quarters of operating losses.
The KDB, which leads a group of lenders, SsangYong and Mahindra & Mahindra, the largest shareholder with a 74.65 percent stake, have been in talks with U.S vehicle importer HAAH.
The ARS program is over at the end of February, and the involved parties ― Mahindra, SsangYong, HAAH and the creditors ― were supposed to submit a list of actions they would fulfill to the bankruptcy court by Jan. 22. But they have failed to reach an agreement.
SsangYong has been leaning toward a prepackaged bankruptcy program, which is a fast-track reorganization program that helps a distressed company escape from bankruptcy by writing off some of its liabilities and allowing creditors to inject new funding to allow a faster recovery.
If that process is finalized, HAAH will most likely purchase a stake in SsangYong. But KDB said it will be hard for the state-run bank to inject cash into the carmaker if Mahindra & Mahindra and HAAH fail to reach an agreement. KDB asked both of them to come up with a more detailed action plan to revive the ailing automaker.
“The reason why SsangYong Motor has been in insolvency is because its largest shareholder has poorly managed the company. We would like to ask why KDB is to be blamed,” a KDB official said. “Also its potential buyer needs to come up with a sustainable plan.”
The KDB said things are clearly different from the case of GM Korea which received a cash injection of $750 million from the state-run bank in 2018.
“GM Korea was able to secure a certain amount of car production from its parent company GM. Also, GM Korea's largest shareholder, GM, offered $6.4 billion in financial aid and promised to let its Korean branch manufacture new vehicles. This is why we decided to provide $750 million,” the KDB official said.
“When it comes to SsangYong, however, its largest shareholder has not taken responsibility for the carmaker, which lost competitiveness. Also, we think our role is very limited at a time when a potential buyer of SsangYong did not reveal its detailed plan,” he added.
The KDB also denied speculation that the state-run bank plans to sell the country's largest shipping company, HMM, saying it never considered any option of handing over its shares to buyers. The KDB is the largest shareholder of HMM with a 12.61 percent share and there have been media reports claiming that the state-run bank is trying to sell its stake to steelmaker POSCO.