SsangYong Motor Company, the South Korean pickup and SUV manufacturer, has applied for bankruptcy protection in Korea after the company defaulted on 60 billion won (£40.4 million) in loans and interest to JP Morgan Chase, Bank of America and BNP Paribas that became payable on 14 December.
SsangYong delayed repayment due to worsening business conditions. The company has been seeking to extend the maturity date with its lenders, but has been unable to reach an agreement, and decided to apply for rehabilitation procedures to avoid interrupting its business operations.
The company will now apply for a Company Property Preservative Measure, a General Prohibition Order and Autonomous Restructuring Support. The decision of whether to commence with the rehabilitation procedures is to be agreed with stakeholders, but the company plans to resolve the current liquidity issue before the rehabilitation procedures are commenced by applying for Autonomous Restructuring Support.
Autonomous Restructuring Support is a private restructuring support programme made with the court which delays the initiation of the rehabilitation procedures by up to three months while the company continues its attempts at private restructuring.
During this period, the company continues its normal business activities. When the company and its interested parties reach the final agreement for the restructuring, the rehabilitation procedure application is withdrawn, and it returns to its normal company status.
Parent company Mahindra & Mahindra, which owns 75% of SsangYong, refused to invest more money into SsangYong earlier in the year. “After lengthy deliberation given the current and projected cash flows, the M&M Board took a decision that M&M will not be able to inject any fresh equity into SYMC (SsangYong Motor Company) and has urged SYMC to find alternate sources of funding,” Mahindra said in a regulatory filing.
An official spokesperson from Mahindra said: “During the period of Autonomous Restructuring Support, Mahindra will take responsibility as a major shareholder, and actively cooperate with SsangYong for the normalisation of management through to the early conclusion of negotiations with interested parties.”
An official source from SYMC said; “We very much regret this situation which is the result of the difficulties being experienced from the worldwide COVID-19 situation, and the concern caused to our partners and stakeholders, especially our employees, sales networks and financial institutions. We are making every effort to transform the situation, and to build a more robust and competitive company for the future.”
In the meantime, SsangYong Motors UK continues to operate as normal. Kevin Griffin, managing director for the brand in the UK, said: “Whilst this situation is not ideal, I strongly believe that the Autonomous Restructuring Programme will result in the birth of a stronger company. I want to reiterate that our UK operations are totally unaffected, and we are very much open for business.”
SsangYong has 65 dealers in the UK, with numbers growing as it acquires dealers leaving the Mitsubishi network.
The Korean parent company, SsangYong Motor Company, currently has debts of 1.5 trillion won (£1.013 billion). It applied for similar corporate rehabilitation in January 2009 following the global financial crisis.
SsangYong now has three months to secure a buyer or negotiate a restructuring plan with its creditors, including Mahindra & Mahindra, or face bankruptcy.