SsangYong Motor submits rehabilitation plan to court

Industry

Published: 27 Jul. 2022, 18:38

SsangYong Motor submits rehabilitation plan to court

SsangYong Motor said Wednesday it has submitted its rehabilitation plan to a Seoul court one month after the court approved a local consortium as the final bidder for the debt-laden carmaker.

On June 28, the Seoul Bankruptcy Court approved SsangYong's decision to select the consortium led by chemical-to-steel firm KG Group for SsangYong's acquisition.

The KG consortium offered the price of 335.5 billion won ($256 million) for SsangYong, which has been under court receivership since April 15, 2021, after its Indian parent, Mahindra and Mahindra, failed to attract an investor amid the Covid-19 pandemic and its worsening financial status.

The rehabilitation plan focuses on SsangYong's debt settlement plans based on the KG consortium's acquisition money and changes in existing shareholders' rights for the KG consortium's controlling stake, the company said in a statement.

It also includes the KG consortium's rights issue plan to raise 564.5 billion won for SsangYong's additional debt payment and operating capital.

SsangYong owes 818.6 billion won, mainly to financial institutions and its subcontractors.

Under the rehabilitation plan, SsangYong will pay 237 billion won to its creditor banks, pay 6.79 percent of 393.8 billion won to subcontractors in cash and 5.43 percent of 136.3 billion won to Mahindra in cash, the statement said.

"SsangYong plans to convert the remaining debt it owes to subcontractors and Mahindra into SsangYong shares in a debt-to-equity swap," a company spokesman said over the phone.

In the case of Mahindra, it will undergo two rounds of reverse stock splits — 1-for-10 and 1-for-3.6 — after completing the debt-to-equity swap. It will sharply lower Mahindra's stake in SsangYong to a single-digit number.

In the 1:10 reverse split, shareholders who hold 10 shares will end up with 1 share.

But the KG consortium is set to emerge as the biggest shareholder with a 58.85 percent stake in the SUV-focused carmaker.

The China-based SAIC Motor Corp. acquired a 51 percent stake in SsangYong in 2004 but relinquished its control of the carmaker in 2009 in the wake of the global financial crisis.

In 2011, Mahindra acquired a 70 percent stake in SsangYong for 523 billion won and now holds a 74.65 percent stake in the carmaker.

SsangYong's lineup consists of the Tivoli, Korando, Rexton, Torres and Rexton Sports SUVs.

Trading of SsangYong shares has been suspended since Dec. 21, 2020. KPMG Samjong declined to offer its opinion for its 2021 financial report due to snowballing losses. SsangYong has posted net losses for six consecutive years through 2021.

Yonhap