KDB clarifies no more financing on SsangYong

The Korea Times

The Korea Times

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Tue, September 26, 2023 | 04:19

Companies

KDB clarifies no more financing on SsangYong

Posted : 2020-12-30 16:26

Updated : 2020-12-30 17:02

SsangYong Motor's plant in Pyeongtaek, Gyeonggi Province / Hankook Ilbo photo by Lim Myoung-soo

By Nam Hyun-woo

The Korea Development Bank (KDB) has clarified its intention not to offer extra financing to SsangYong Motor, which requested an autonomous restructuring support (ARS) program recently after filing for receivership with a local court.

The KDB's stance would force SsangYong's largest stakeholder, India's Mahindra & Mahindra, to expedite its ongoing negotiations with HAAH, a U.S. vehicle importer that has shown interest in buying its stake in the Korean automaker.

According to the Seoul Bankruptcy Court, it met with KDB officials over SsangYong's insolvency issue Dec. 24 after it filed for receivership, Dec. 21, due to its inability to repay 165 billion won ($152 million) in loans from the state-run bank and other lenders. Of the debt, which was due this month, 90 billion won is owed to the KDB.

The ARS program allows the bankruptcy court to delay the commencement of the receivership process up to three months, so SsangYong can salvage itself through restructuring and other means. During this period, its debts will be frozen. The court accepted this and postponed receivership until Feb. 28, meaning SsangYong and Mahindra have earned a two-month period to discuss with creditors plans to salvage itself without going bankrupt.

In preparation for the receivership, the court discussed with KDB officials the possibility of the bank offering further loans or support to save SsangYong.

However, an official from the court said that the KDB officials showed a "conservative" approach to infusing additional capital or extending the due period of loans to SsangYong unless the carmaker found new investors or other ways to improve its cash flow.

The KDB's stance is anticipated to affect other creditors too.

Since SsangYong has posted operating losses for 15 straight quarters since the latter half of 2017, the company is assumed to have no chance of turning a profit on its own. This means SsangYong and Mahindra will exert greater efforts to win an investment from HAAH, and then persuade the creditors that it has improved its sustainability.

The KDB refused to elaborate about the specifics of its meeting with the bankruptcy court, but said it was sticking to its restructuring principles that the largest shareholder bore primary responsibility.

"The KDB reiterated our principles on restructuring," a bank official said. "This is the largest shareholder's responsibility, and then comes stakeholders' burden sharing. Though we have not set any conditions on what the largest shareholder's responsibility is, winning new investments into SsangYong could be interpreted as one of them."

As the KDB has underscored the importance of new investors, talks between Mahindra and HAAH over SsangYong are set to accelerate, as the former is being pressured to be more open to HAAH's demands in acquiring its SsangYong stake. HAAH is said to have offered $258 million for 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.

According to industry officials, SsangYong Motor CEO Yea Byung-tae told union members that the company's negotiations with a new investor were "accelerating" and would produce an outcome in the near future.

namhw@koreatimes.co.kr