[ad_1]
Employees come to work at Ssangyong Motors headquarters in Pyeongtaek, Gyeonggi-do. Photo = News 1
Ssangyong Motor did not repay the loan due to business difficulties(2,770 0.00%)Requested for business rehabilitation procedures (previously judicial management). Ssangyong Motor plans to solve the loan problem in up to three months, but there is a growing sense of crisis that 10,000 jobs may disappear if the plan is not completed.
On the 21st, Ssangyong Motor received a request for the initiation of rehabilitation proceedings in the Seoul Rehabilitation Court, a request for the company’s property preservation provision, a request for a comprehensive prohibition order, and a request for a decision to suspend the rehabilitation procedures (ARS). The case was assigned to the first part of the rehabilitation court.
Ssangyong Motor, which matured 60 billion won and borrowed from JPMorgan, BNP Paribas, and Bank of America Merrill Lynch on the 15th of this month, failed to repay the 90 billion won from the Korea Development Bank and the 15 billion won. won from Woori Bank. Ssangyong Motor’s past due principal and interest increased to 165 billion won.
The Korean Development Bank is in the position that it is possible to extend the maturity of 90 billion won only when the delinquency of foreign bank loans is resolved for the first time. It is noted that Woori Bank is unlikely to extend maturity first.
“Solve liquidity problems in 3 months” … Resignation of former executive ‘Ooojin Bae’
Cars awaiting release are waiting at the office of Ssangyong Motor’s Pyeongtaek factory in Pyeongtaek, Gyeonggi province. Photo = News 1
Ssangyong Motor said: “We have negotiated an extension of the maturity with the financial institution, but if we repay the expiring debts, such as not reaching an agreement, it is expected to cause a large disruption in business operations, so we inevitably request procedures for rehabilitation”.
He then emphasized: “We plan to close the liquidity problem early before the start of the rehabilitation process by receiving the ARS program at the same time.” All the executives submitted their resignations and resolved to resolve the liquidity problem within three months.
The ARS program is a system in which the initiation of rehabilitation proceedings is delayed for up to three months after the court confirms the creditors’ intentions. The holding period is a system that allows the company to return to being a normal company by withdrawing the request for rehabilitation procedures by agreement of the interested parties while conducting normal business activities.
For the time being, Ssangyong Motor plans to agree to adjust its interests with creditors and major shareholders, relieve itself of the burden of repayment of loan principals, etc., and conclude negotiations with investors currently underway.
When the rehabilitation process begins … Large-scale restructuring is inevitable
Lee Dong-geol, President of Industrial Bank. Photo = Yonhap News
However, if Ssangyong Motor’s plan does not move forward, around 10,000 jobs will face a crisis.
The court initiates the rehabilitation procedure if it recognizes that the value when the company is maintained (survival value) is greater than the value when it is liquidated (liquidation value) based on the request for the corporate rehabilitation procedure and the report of a accounting firm, etc. This trial usually takes more than a year and the rehabilitation process is expected to be accompanied by a large-scale restructuring.
President Lee Dong-geul and San-eun said at a press conference in June, saying, “Ssangyong is just trying to live and doesn’t seem to be taking everything seriously.”
In the event of a business crisis such as the default on Ssangyong Motor’s debts, the KDB also disclosed its position that it plans to ditch the Pyeongtaek and Changwon factories as collateral and get them back. Instead of an indirect response saying that they will help normalize the management, they have expressed their willingness to respond strictly.
In this view of Saneun, the perception that Ssangyong Motors spends too much on employee wages compared to sales. Last year, Ssangyong Motor spent around 428.9 billion won on employee wages. Even in the case of a deficit, the median salary per person reached 86 million won.
As of September this year, it was reduced to 235.3 billion won and an average of 48 million won per person, but since the average tenure is 22.6 years, restructuring to reduce fixed costs is anticipated to be inevitable if rehabilitation procedures are taken.
The worst is the ‘liquidation’ … Tens of thousands of livelihoods
At Ssangyong Motor, not only Ssangyong Motor employees are working, but also unaffiliated workers, subcontractors, and salespeople at front-line sales offices. Photo = News 1
However, if the court finds that there is no rehabilitation value and the liquidation procedure is carried out, the damage is expected to affect the partners.
As of September this year, the number of employees at Ssangyong Motors was 4,880 and 5,900 people were employed when ‘unaffiliated workers’ such as dispatch, service and contract were combined. The main associated companies of Ssangyong Motor are 448, with 168,559 employees. If Ssangyong Motor’s sales dependence is limited to 50% or more, it will be reduced to 32 companies and 1,129. When Ssangyong Motor entered legal management in 2009, it is highly likely that companies with 50% or more dependence on sales are declared bankrupt or business abandonment.
Eventually, if Ssangyong Motor is liquidated, around 7,000 jobs will be lost. The industry predicts that 10,000 jobs will be directly affected by the combined sales. Furthermore, since 126 suppliers depend on Ssangyong Motor’s sales for more than 5%, it is estimated that the 11,3052 people they employ will also be in indirect influence. Even if they do not face bankruptcy, business conditions will deteriorate and jobs may be lost due to restructuring. We are also concerned about the damage to the local economy as a whole.
An employee at a plating factory is working on nickel and chrome plating on auto parts. Photo = Korea Economic Daily DB
The industry believes that if Ssangyong Motor fails to find new investors within three months and begins the rehabilitation process, chances are high that the court will decide to liquidate. Ssangyong Motor posted an operating loss of KRW 93.1 billion in the third quarter of this year, representing a loss for 15 consecutive quarters. Operating losses during this period exceeded 600 billion won.
The capital erosion rate rose to 86.9% on a consolidated basis in the third quarter. Samjung Accounting Firm, an auditor, also stated in its quarterly report that “important questions arise about its ability to survive as a continuing company.”
An industry insider said: “It is better to find a new investor within 3 months”, but “It is true that the chances of rehabilitation of Ssangyong Motor are not high by financial criteria, but in this period when the economy becomes difficult due to the new coronavirus infection (Corona 19) if it is liquidated. “It will be difficult for tens of thousands of people, including the unemployed and their families,” he said.
Sesung Oh, Hankyung.com Reporter [email protected]
Article Reports and Press Releases [email protected]
