SsangYong Motor purchase in doubt as investor balks
"We haven't received a business plan that justifies an investment," a Keystone executive told the JoongAng Ilbo on Dec. 31.
The private equity firm joins Korea Development Bank (KDB), which is needed for debt financing, in raising questions about the purchase and the consortium's aim of transforming the failing company into a profitable electric-vehicle (EV) manufacturer.
Edison Motors, an electric bus maker from Hamyang, South Gyeongsang, was chosen as the preferred bidder in October last year for SsangYong Motor, which was placed under court receivership in April.
It was joined by Korea Corporate Governance Improvement (KCGI) fund, Keystone Private Equity and Semisysco in making the 310 billion won ($260 million) offer for the company — later reduced to 300 billion won — and promising to invest significant amounts into turning the operation around.
More than 1 trillion won will be needed following the acquisition for working capital, debt management and the payment of overdue salaries.
Edison said SsangYong Motor will produce 10 EV models this year, 20 by 2025 and 30 by 2030, and that it will turn SsangYong Motor into a profit-making company in the next three to five years by transforming the maker of internal combustion-engine SUVs into an EV maker.
"Without a mid to long-term business plan to recover SsangYong Motor's business, we can't do it," the executive said Keystone told Edison Motors.
The executive noted that even if the main acquisition deal between Edison Motors and SsangYong Motor is signed, financial support "can only be provided if there is a strategy to develop SsangYong Motor."
Edison Motors was planning to borrow 700 billion won from financial institutions including KDB using SsangYong's Pyeontaek factory as collateral. An additional 500 billion won was to be sourced from consortium partners.
"Its plan needs to be evaluated by a third party," KDB Chair Lee Dong-gull said in December. "It is questionable whether the plan can actually be carried out and satisfy consumer's expectations."
With a KDB loan unlikely, Edison Motors came up with a plan B recently, saying it would work with the city of Pyeongtaek to turn SsangYong's factory site into an apartment complex to raise additional funding.
The Pyeontaek government said in a recent statement that the city has not approved the development of the factory site.
"Investors are considering additional investments," Kang Young-kwon, CEO of Edison Motors, said. "We are also negotiating with foreign investors about a trillion won-level investment."
BY YEOM JI-HYUN, JIN EUN-SOO [firstname.lastname@example.org]
with the Korea JoongAng Daily
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