SsangYong Has Applied For Receivership After Defaulting On 90 Billion Won Loans; more than 5,000 direct employees could lose their jobs
Mahindra’s Korean subsidiary, SsangYong, filed for bankruptcy after defaulting on loans worth 90 billion won (Rs. 602 crore approximately) due to the KDB (Korea Development Bank). The gap between the two parties was quite obvious in recent months, as Mahindra openly announced its intentions not to invest more in the crash-troubled SUV maker.
Additionally, the SsangYong Rexton G4-based Mahindra Alturas G4 flagship SUV will be discontinued next year due to the brand having components to produce only 500 more units locally. SsangYong defaulted by debuting with a consortium of banks including Bank of America, BNP Paribas and JP Morgan Chase. It comes on the back of the homegrown brand looking for a suitor for the last six months.
In addition, SsangYong has also applied for the ARS (Autonomous Restructuring Support) program. Mahindra stopped a reclamation project worth Rs. Rs 3,000 crore exacerbating the problems of its Korean subsidiary. Mahindra signed a definitive agreement to buy a 70 percent stake in SsangYong Motor Company for $ 463 million in January 2011. And for nearly a decade, SsangYong has sought receivership.
The 66-year-old Korean company has been primarily a UV producer over the years and despite Mahindra’s attempts to introduce new models and expand its reach across different continents, global economic conditions and many other factors were unable to help maintain a stable business. Without KDB’s extension for loan maturity, SsangYong can initiate insolvency proceedings.
SsangYong must have to maintain sales of its assets to enter bankruptcy, and therefore more than 5,000 people could lose their jobs, in addition to those of dealers and suppliers. Under the receivership program, you can continue production and negotiations with an interested buyer with a much lower valuation. Talks with a US-based auto dealer may have stalled.
SsangYong could continue to operate under the supervision of its board if the court approves the ARS (Autonomous Restructuring Support) program. He will meet with stakeholders regarding a revival package and the Seoul Bankruptcy Court will be responsible for determining whether or not the restructuring processes should begin.
