Mahindra Repays 30 Billion KRW of Ssangyong Motor's Foreign Bank Loans on Their Behalf

Sale Negotiations Virtually Collapsed... Possibility of Considering P-Plan

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Mahindra, the major shareholder of SsangYong Motor, has repaid SsangYong Motor's Bank of America (BoA) Merrill Lynch loan on its behalf.

According to the court and industry sources on the 27th, Mahindra repaid 30 billion KRW of BoA loans that SsangYong Motor had defaulted on this month. A court official explained, "Mahindra repaid SsangYong Motor's debt to BoA at least two weeks ago," adding, "BoA's debt disappeared, so it withdrew from the SsangYong Motor creditors' committee."

Earlier, SsangYong Motor disclosed on December 15 last year that it had defaulted on principal and interest payments of 60 billion KRW borrowed from foreign banks. Not only the 30 billion KRW borrowed from BoA but also loans from JP Morgan (20 billion KRW) and BNP Paribas (10 billion KRW) were in default. Mahindra had provided payment guarantees related to borrowings from the three foreign banks and stated its intention to take responsibility immediately after the default. When the court approved SsangYong Motor's ARS (Autonomous Restructuring Support) on the 28th of the same month, BoA joined the creditors' committee and participated in preparing the corporate improvement plan.

Mahindra's decision not to extend the payment guarantee related to the BoA loan and to promptly repay it is interpreted as a determination to completely withdraw from SsangYong Motor's management. Mahindra has been seeking to sell all of its 74.7% stake in SsangYong Motor through negotiations with HAAH Automotive and leave. On the other hand, HAAH insists that Mahindra should retain a 20% stake in SsangYong Motor to share responsibility. Due to disagreements between the two parties, the sale negotiations have effectively collapsed, and the Korea Development Bank is reportedly leading ongoing negotiations with HAAH.

There is also a possibility that SsangYong Motor will consider a pre-packaged rehabilitation plan (P-plan). The P-plan is a restructuring method where the court quickly reduces debt, and creditors inject new funds. In this case, Mahindra's shareholding would inevitably be reduced, and there is a possibility that the 700 billion KRW invested in SsangYong Motor may not be recovered.