SEOUL, Feb. 2 (Yonhap) — The main creditor of SsangYong Motor Co. said Tuesday it has yet to decide on the cash-strapped automaker’s push for a speedier bankruptcy procedure as SsangYong failed to receive approval from its potential buyer.
SsangYong, the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd., has been under court receivership since last month, as it defaulted on loan payment of about 165 billion won ($147.8 million).
Mahindra, which holds a 74.5 percent stake in SsangYong, has been in talks with HAAH Automotive Holdings, a U.S. vehicle distributor, to sell its majority stake, but they have not yet reached an agreement.
Choi Dae-hyun, vice president of the state-run Korea Development Bank (KDB), said the potential buyer did not make a final decision on the pre-packaged plan due to SsangYong’s delayed document submission.
The pre-packaged plan is a combination of workout and court protection under which a restructuring plan is agreed upon prior to the filing of the bankruptcy case to streamline the bankruptcy process. It starts with the approval of creditors who hold more than half of a company’s debts.
“As the P (prepackaged) plan needs support from the potential investor, the KDB can’t decide whether to provide financial assistance at this point,” Choi said in an online briefing.
“Once the restructuring plan is made, (the KDB) can decide whether to agree with the P-plan after reviewing the potential buyer’s investment plan and feasibility of SsangYong’s plan.”
If SsangYong fails to draw fresh investment or submits an unfeasible plan, its liquidation may be unavoidable, Choi added.
According to industry sources, HAAH Automotive proposed a 270 billion won investment to acquire a 51 percent stake in SsangYong and demanded the KDB inject a similar amount of funds into the automaker for the deal.
The KDB has been under pressure to inject additional funds into SsangYong to avoid job losses and bankruptcy of its contractors.
SsangYong has faced difficulty at production lines in Pyeongtaek, about 70 kilometers south of Seoul, as some of its contractors refused to supply parts on delayed payments for their goods.
The smallest of the country’s five automakers by sales logged net losses since 2017 due to lack of new models and tougher competition with local rivals.
Last year, the SUV maker’s sales fell 18.6 percent on-year to 2.95 trillion won, and operating losses widened to 423.5 billion won, up 50.2 percent from a year earlier.