Court Appoints Jeong Yong-won as Trustee
Restructuring Plan Must Be Submitted by July 1
Jeong Says "Will Conclude Rehabilitation Process Early"
[Asia Economy reporters Seongpil Jo and Gimin Lee] Ssangyong Motor, which is on the brink of survival, has once again entered rehabilitation proceedings by court decision. It is the first time in 10 years since it graduated from court receivership in March 2011.
The Seoul Rehabilitation Court, Rehabilitation Division 1 (Chief Judge Kyunghwan Seo) decided on the morning of the 15th to commence rehabilitation proceedings for Ssangyong Motor. Ssangyong Motor will undergo rehabilitation proceedings under the supervision of a court-appointed administrator. The court appointed Yongwon Jeong, Ssangyong Motor’s Head of Planning and Management Division (Executive Director), as the administrator. Following the commencement of rehabilitation proceedings, creditors, secured creditors, and shareholders must submit their lists from that day until the 29th. Claims for rehabilitation debts, secured claims, and stock reports can be filed at the Seoul Rehabilitation Court’s General Civil Affairs Office from the 30th until the 13th of next month. However, failure to report rights within this period may result in loss of those rights.
The court will commission an investigation committee to conduct a detailed audit of Ssangyong Motor’s financial status, including accounting inspections. Han Young Accounting Corporation has been appointed as the investigator. Based on the results, the administrator will prepare a specific rehabilitation plan by July 1. If the creditors approve the rehabilitation plan at the upcoming creditors’ meeting and the court also sanctions it, Ssangyong Motor will proceed with the plan and move toward normalization.
However, it remains uncertain whether Ssangyong Motor can achieve business normalization. Previously, Ssangyong Motor faced a liquidity crisis after failing to repay 165 billion KRW in matured debt, leading to the current corporate rehabilitation application. If the scale of insolvency is found to be more severe than known and the rehabilitation value is deemed insufficient, creditors may reject the plan. In that case, liquidation proceedings may follow. Nevertheless, considering the 20,000 jobs involved, it is highly likely that the court will pursue finding a new buyer through public sale rather than liquidating Ssangyong Motor, aiming to save the company.
Ssangyong Motor has expressed its intention to conclude the rehabilitation process early by selecting a merger and acquisition (M&A) advisor as soon as possible. Despite delays in negotiations with existing potential investors, given the presence of multiple interested buyers, Ssangyong Motor plans to seek the rehabilitation court’s approval to proceed with an 'M&A before rehabilitation plan approval.' Administrator Yongwon Jeong stated, "Protecting creditors’ rights and the company’s rehabilitation depend on normal operations. We will consult with partner companies to resume production as soon as possible and alleviate customer concerns arising from the commencement of rehabilitation proceedings through seamless after-sales service."
When Ssangyong Motor applied for corporate rehabilitation in December last year, it also applied for the Autonomous Restructuring Support program (ARS), which postpones the start of proceedings for three months. However, HAAH Automotive, the prospective buyer in the sale negotiations, did not submit a Letter of Intent (LOI) by the court’s deadline (end of March), and the court notified Ssangyong Motor that it could no longer delay the process. Subsequently, the court sought opinions from the creditors’ committee and the management committee regarding the commencement of rehabilitation proceedings and the appointment of an administrator. Both parties reportedly submitted their opinions yesterday.
Ssangyong Motor previously underwent court receivership once in 2009. Following the global financial crisis triggered by the 2008 subprime mortgage crisis, the company faced severe management difficulties and applied for corporate rehabilitation in January 2009, resulting in the layoff of approximately 2,600 employees. Ssangyong Motor graduated from court receivership in 2011, but the layoff issue was only resolved in 2018 when all dismissed workers were reinstated.
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