SsangYong Motor's 'future existence in question,' according to auditor

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SsangYong Motor's 'future existence in question,' according to auditor

SsangYong Motor's Pyeongtaek factory [YONHAP]

SsangYong Motor's Pyeongtaek factory [YONHAP]

 
SsangYong Motor's auditors have refused to sign off on the carmaker's half-year report, increasing the risk that the company could be delisted if the issue isn't resolved by the end of the year.
 
The Korean unit of Mahindra & Mahindra wasn’t given an opinion due to its liquidity crisis, according to a regulatory filing on Aug. 14.
 
“The company’s floating liability exceeds liquid assets by 447.9 billion won ($377 million), which puts the company’s future existence in question,” Samjong KPMG, the automaker’s auditor, wrote in the regulatory filing.
 
According to the report, the beleaguered automaker posted a 215.8 billion won operating loss and 202.4 billion won net loss in the first half. Its debt stood at 1 trillion won while its assets were valued at a mere 537.6 billion won.
 
SsangYong Motor's report at the end of the first quarter was also not signed off.  
 
As the automaker was refused an opinion in its half-year report, the company was designated as “administrative issue” by the Korea Exchange on Aug. 14. Its shares have been temporarily suspended on the main bourse and will resume trading on Aug. 19 when the market opens.
 
Being designated as administrative issue indicates that the company has failed to secure the liquidity required for a listed company. It is also a warning to investors that the company could soon be delisted due to the liquidity issue.
 
Of the four audit opinions — unqualified, qualified, adverse and disclaimer — if the company receives either of the latter two in the year-end audit report, it could get delisted.
 
SsangYong Motor is in desperate need of new investors to revive its business.
 
Its parent company Mahindra & Mahindra, which currently holds a nearly 75 percent stake, said earlier this month that it would lower its ownership to under 50 percent and give up its status as the biggest shareholder if new investors step in.
 
Chinese carmakers including BYD and Geely and Vietnamese carmaker Vinfast are said to be interested in SsangYong Motor, but nothing has been officially announced.
 
If Mahindra lowers its ownership to under 50 percent, foreign banks which have provided loans to SsangYong could immediately demand repayment as their condition for the loans included Mahindra having more than a 51 percent stake in the Korean auto company.
 
According to the regulatory filing, SsangYong Motor has short-term loans worth 306.9 billion won as of the first half of this year, nearly half of which come from foreign financial companies including JP Morgan, BNP Paribas and the Bank of America.
 
SsangYong Motor has been on the edge of a cliff since early this year when its Indian parent company withdrew its initial plan to inject 230 billion won into the company, but agreed to inject a one-time emergency fund of 40 billion won.
 
The Korean carmaker as a result resorted to selling off assets such as its logistics center in Busan for 20 billion won and its after-sales service center in Seoul for 180 billion won. It also cut down wages and welfare benefits to save about 100 billion won this year. It enabled the automaker to pay back 8.7 billion won of debt to KB Kookmin Bank.
 
The Korea Development Bank and Woori Bank extended the maturity date of their loans, worth 90 billion won and 15 billion won respectively, until the end of this year.  
 
BY JIN EUN-SOO   [jin.eunsoo@joongang.co.kr]

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