Ssangyong Motor Facing Extinction Crisis, Any Revival Plans?

Failure to Receive HAAH Investment Letter of Intent During Voluntary Restructuring Period
Rehabilitation Court Does Not Immediately Enter Court Receivership
Edison Motors, Park Seokjeon & Company Show Acquisition Interest

[Asia Economy Reporters Ki-min Lee, Sun-mi Park] Ssangyong Motor has been pushed into a timing battle after failing to receive a Letter of Intent (LOI) for investment from the U.S. company HAAH Automotive during the voluntary restructuring period. To avoid corporate rehabilitation proceedings (court receivership), Ssangyong must submit HAAH's LOI containing investment details and a P-Plan (pre-rehabilitation plan) to the court as soon as possible.

According to the court and industry sources on the 2nd, the Seoul Rehabilitation Court does not plan to immediately initiate court receivership for Ssangyong. Under the Rehabilitation Act and Seoul Rehabilitation Court's procedural guidelines, before starting court receivership, the court must review Ssangyong's amendment documents and seek opinions from the creditors' committee composed of creditors. Previously, on the 31st of last month when the voluntary restructuring ended, Ssangyong submitted amendment documents excluding HAAH's LOI.

For Ssangyong to escape the threat of court receivership, it is essential to submit HAAH's LOI specifying the investment details and amount within 1 to 2 weeks as the related procedures proceed. A court official stated, "It is difficult to predict when the court will initiate rehabilitation proceedings, but legally, time is needed to gather opinions from the creditors' committee." Of course, even after the court starts receivership, submitting the LOI is possible, but it will not convert into a short-term court receivership P-Plan.

The problem is that HAAH is currently experiencing difficulties in negotiations with some investors. HAAH's strategic investors (SI) and financial investors (FI) are reportedly burdened by the public claims amounting to 370 billion KRW, including 310 billion KRW incurred before Ssangyong's voluntary restructuring and 60 billion KRW for salaries and taxes in January and February this year. There are also reports that one of the FIs has withdrawn from investing in Ssangyong, prompting HAAH to seek new investors. Due to this, there are concerns that employees may need to reduce their salaries themselves until the company returns to profitability to lessen the investment burden on investors.

Currently, companies other than HAAH are also showing interest in acquiring Ssangyong. Edison Motors, a domestic electric commercial vehicle company, has publicly expressed its investment intentions through the media. Additionally, Park Seokjeon & Company, an affiliate of the small private equity firm Hyunlim Partners, submitted a management rights purchase and investment proposal to the court on the 31st of last month. However, Ssangyong and its trade creditors' association are looking for companies like HAAH that have a U.S. sales network and can quickly turn the situation around.

Support from the Korea Development Bank (KDB) for Ssangyong is also emerging as a possible way to overcome the short-term crisis, but KDB maintains its stance that support measures can only be considered if Ssangyong secures new investors and submits a business plan capable of restoring normal management after investment. However, financial authorities and KDB appear to have prepared follow-up measures in case Ssangyong ultimately fails to secure investment. Financial Services Commission Chairman Eun Sung-soo told reporters the day before, "Regarding the Ssangyong issue, I have discussed with KDB President Lee Dong-geol how to respond to various scenarios. We will take necessary actions after seeing the results."