Ssangyong Motor Applies for Court Receivership Again After 11 Years, Buys Time with 'ARS'

Delay of up to 3 Months in Commencement of Rehabilitation Proceedings... Continuing Stakeholder Consultations

[Image source=Yonhap News]

[Asia Economy Reporter Kim Ji-hee] Ssangyong Motor has once again filed for corporate rehabilitation proceedings (court receivership) after more than 11 years.

According to Ssangyong Motor on the 21st, the company held a board meeting at its Pyeongtaek headquarters and resolved to apply for rehabilitation proceedings. Subsequently, it submitted an application for commencement of rehabilitation proceedings along with a petition for preservation of company assets and a comprehensive injunction application to the Seoul Rehabilitation Court.

Ssangyong Motor explained, "On the 15th, due to worsening management, we defaulted on principal and interest payments on a 60 billion KRW loan from overseas financial institutions and have been negotiating maturity extensions with the financial institutions, but no agreement was reached. Since repaying the debts due would cause significant disruption to business operations, we were compelled to apply for rehabilitation proceedings."

However, on the same day, Ssangyong Motor expressed its intention to resolve liquidity issues before the commencement of rehabilitation proceedings by simultaneously submitting an Autonomous Restructuring Support (ARS) program. The ARS program is a system where the court confirms the creditors' intentions and can postpone the start of rehabilitation proceedings for up to three months. Through the court's preservation order and comprehensive injunction, the company can continue normal business activities as before and reach an agreement among stakeholders during the postponement period to withdraw the rehabilitation application.

Through this, Ssangyong Motor has gained up to three months to be relieved from repayment burdens and negotiate with creditors and major shareholders. Ssangyong plans to expedite negotiations with investors during this period and withdraw the rehabilitation application to nullify the process. If a smooth agreement with creditors is not reached during this period, the court will decide whether to commence rehabilitation proceedings and proceed with subsequent steps.

Meanwhile, concerns have arisen that a large-scale restructuring crisis similar to that of 11 years ago may recur as Ssangyong Motor enters corporate rehabilitation proceedings. Previously, Ssangyong Motor entered court receivership in 2009 and met its new owner, Mahindra, in the following year, graduating from court receivership in 2011. However, during that time, the court judged that large-scale restructuring was necessary for Ssangyong's rehabilitation, resulting in the layoff of about 2,600 employees. The 'Ssangyong Motor incident' left a deep scar on the company until all dismissed workers were reinstated in 2018.