Ssangyong Motor Eases Burden of Rehabilitation Proceedings Start... "Court Grants Time to Submit 'P Plan'"

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] The deadline for initiating the rehabilitation process of Ssangyong Motor has likely been extended, easing some concerns. Ssangyong Motor plans to first extend the Autonomous Restructuring Support (ARS) program and proceed with the procedures to enter the P-Plan (pre-rehabilitation plan) around early to mid-next month.

According to the court and industry sources on the 26th, the Seoul Rehabilitation Court has decided to postpone the decision to commence the rehabilitation process if Ssangyong Motor applies for an extension of the ARS. A Ssangyong Motor official stated, "We received a response from the court that it will withhold the decision to start the rehabilitation process as long as negotiations between Ssangyong Motor, HAAH, and other stakeholders continue," adding, "This means that the time to submit the P-Plan (preliminary plan) is guaranteed." Previously, Ssangyong Motor applied for the commencement of the rehabilitation process and ARS to the Seoul Rehabilitation Court on December 21 last year, and the court had postponed the decision to start the rehabilitation process until the 28th of this month.

For Ssangyong Motor to apply for the P-Plan to the court as planned in early to mid-next month, it must obtain final approval from the Reserve Bank of India (RBI), which has set conditions for reducing the equity and debt of the major shareholder, Mahindra. Afterward, Ssangyong Motor will sign an investment contract with HAAH Automotive and disclose the rehabilitation plan to the entire creditor group to obtain consent for entering the P-Plan. However, RBI's approval has not yet been granted, and the investment contract with HAAH has not been finalized.

Since Mahindra strongly desires to sell Ssangyong Motor, RBI's approval is expected to come in early next month. Additionally, as Ssangyong Motor plans to resume production from the 2nd of next month, investment negotiations with HAAH are also expected to accelerate. Ssangyong Motor, which operated its factory for only three days this month, has managed to persuade most suppliers who had refused deliveries to resume supply. An industry official said, "The Ssangyong Motor and the Emergency Countermeasure Committee of partner companies have persuaded most of the suppliers who had declared supply suspension," adding, "Ssangyong Motor has also decided to reopen its factory next month."

However, it is known that internally Ssangyong Motor is preparing contingency plans in case the investment contract with HAAH falls through and the P-Plan cannot be initiated. If the P-Plan fails, Ssangyong Motor is likely to enter court receivership. In the worst-case scenario, Ssangyong Motor could go bankrupt, causing a chain bankruptcy among partner companies. In this case, the main creditor bank, the Korea Development Bank, would also not be free from responsibility.