[Asia Economy Reporter Choi Dae-yeol] Ssangyong Motor announced on the 27th that it has submitted a rehabilitation plan reflecting the investment contract details of the KG Consortium, selected as the final prospective acquirer, to the Seoul Bankruptcy Court.
According to the company, the rehabilitation plan includes a debt repayment plan using the KG Consortium's acquisition price of 335.5 billion KRW as the repayment source and a shareholder rights modification plan to guarantee the equity ratio of the final prospective acquirer.
The total debt subject to repayment is approximately 818.6 billion KRW (excluding unrealized subrogation claims). Among these, about 237 billion KRW in secured claims and 51.5 billion KRW in tax claims will be fully repaid according to relevant laws. Of the rehabilitation claims amounting to 393.8 billion KRW, excluding loans and subrogation claims of 136.3 billion KRW from the major shareholder Mahindra & Mahindra, 6.79% will be repaid in cash, and 93.21% will be converted into equity.
The company explained that the effective repayment rate of rehabilitation claims, considering the value of the converted equity, is about 36.39%. For the major shareholder's loans and subrogation claims, 5.43% will be repaid in cash and 94.57% will be converted into equity, which is about 80% of the general rehabilitation claim repayment rate.
Mahindra's held shares will be consolidated by merging 10 common shares with a face value of 5,000 KRW into 1 share, and new shares with a face value of 5,000 KRW per 5,000 KRW of claim amount will be issued for the rehabilitation claims subject to equity conversion. Then, all shares including the new shares will be re-consolidated by merging 3.16 common shares into 1 share. After this process, if new shares with a face value and issue price of 5,000 KRW per share are issued for the acquisition price of 335.5 billion KRW, the acquirer's equity ratio will be 58.85%.
Previously, the rehabilitation plan based on the investment contract with Edison Motors Consortium in February had a cash repayment rate of 1.75% and an effective repayment rate of about 9.6% considering the stock value. The stock re-consolidation ratio after equity conversion was 23 to 1.
Ssangyong Motor stated that the current rehabilitation plan includes a provision for the acquirer, KG Consortium, to additionally raise about 564.5 billion KRW through a paid-in capital increase to repay public claims and secure operating funds after the rehabilitation plan is approved. The company also said that even after submitting the rehabilitation plan, it will continue to discuss ways to improve the debt repayment rate with the acquirer and stakeholders and reflect them in a revised rehabilitation plan submitted just before the creditors' meeting.
Jung Yong-won, the Ssangyong Motor administrator, said, "We are well aware that the debt repayment rate of the rehabilitation plan does not meet the expectations of creditors, shareholders, and other stakeholders," but added, "If the rehabilitation plan is approved, additional inflow of operating funds will enable repayment of public claims and proper execution of investment costs, laying the foundation for the company’s sustainable growth."
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