SsangYong files for court receivership

SsangYong Motor plant in Pyeongtaek, Gyeonggi Province / Courtesy of SsangYong Motor

By Kim Yoo-chul, Nam Hyun-woo

SsangYong Motor, the Korean affiliate of Mahindra & Mahindra (Mahindra), filed for court receivership with a Seoul court, Monday, after it missed repayments of a total of 150 billion won to foreign financial institutions and its main creditor the Korea Development Bank (KDB).

According to the Seoul Bankruptcy Court, the ailing car manufacturer filed for a receivership program around 3 p.m., after the decision was approved of at a shareholders meeting. The filing will force SsangYong to undergo drastic restructuring programs including massive layoffs in return for receiving financial support.

To enter receivership, SsangYong must freeze any sales of its assets. In return, under the program the company won't have to pay back its outstanding debts and debts payable but must pay monthly salaries to employees and electricity and water use bills.

The trade ministry issued a statement that SsangYong will pursue an autonomous restructuring support program (ARS) over the next three months. "After discussions with interested parties and SsangYong's debt holders, the specifics of the court receivership program will be finalized," the ministry said.

Regarding the filing, SsangYong Motor said the request was a result of a breakdown in discussions with the KDB and other debt-holders over the possible extension of due debts. "SsangYong decided to file for court receivership based on the belief that the company will be gravely affected if we pay back all outstanding debt," SsangYong said.

On the news, SsangYong shares plunged 19.24 percent to close at 2,770 won Monday.

The car manufacturer was forced into this situation after Mahindra ― its "owner" ― earlier confirmed SsangYong missed a repayment of 60 billion won to JPMorgan Chase Bank, which was due Dec. 14.

SsangYong has been battered by the COVID-19 pandemic and had outstanding loans immediately payable of 150 billion won, including 90 billion won to the KDB. It also owes 10 billion won to BNP Paribas and 30 billion won to Bank of America.

The KDB had extended the due date of its loan to Dec. 21, an extension of five months from the previously repayment schedule.

SsangYong's decision was mostly due to Mahindra's decision not to inject additional funding into the Korean car manufacturer. Mahindra was seeking to hand over its managerial rights to vehicle distributor HAAH Automotive, but the move was blocked due to opposition from the Indian government, according to sources familiar with the issue.

The court receivership of the ill-fated firm comes 11 years after Chinese company SAIC Motor gave up managing the company in 2009. The SUV manufacturer has suffered deficits for 15 straight quarters.

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