SEOUL, Feb. 17 (Yonhap) — South Korea’s top financial regulator said Wednesday it would be better to keep SsangYong Motor Co. afloat as its bankruptcy would result in massive job losses.
Financial Services Commission (FSC) Chairman Eun Sung-soo made the remark during a meeting of the National Assembly National Policy Committee, answering a lawmaker’s question about the fate of the financially troubled carmaker.
“It will be a demanding task to financially support SsangYong Motor’s subcontractors. It appears to be better (for creditors) to focus on extending a financial helping hand to SsangYong if it costs less than expected,” the FSC chairman said.
SsangYong Motor filed for the court-led rehabilitation procedure after it failed to obtain approval for the rollover of 165 billion won worth of loans from its creditors.
But the company received a two-month suspension of its obligation to pay its debts, as it aims to find a new investor during the period before the court-led restructuring begins on Feb. 28. The suspension period can be extended depending on the court’s decision.
SsangYong’s Indian parent Mahindra & Mahindra Ltd. reportedly has been in talks with HAAH Automotive Holdings, Inc., a California company that imports vehicles for the U.S. market, to sell its majority stake in the Korean unit. But no progress has been made yet.
The SUV-focused carmaker has been preparing to submit its plan for a speedier rehabilitation procedure by Feb. 28 under a “prepackaged” bankruptcy plan.
The prepackaged plan is a combination of debt rescheduling and court protection under which a restructuring plan is agreed upon in advance of a company declaring its insolvency. It is intended to shorten and streamline the bankruptcy process.
But SsangYong plans to submit the prepackaged plan next month as the potential investor has expressed concerns over the suspended production at the company’s plant in Pyeongtaek, 70 kilometers south of Seoul, a person familiar with the matter told Yonhap News Agency.
The Pyeongtaek plant halted production on Dec. 24, Dec. 28, Feb. 3-5, Feb. 8-10 and Feb. 15-19 as subcontractors refused to supply parts due to delayed payments for past deals.
Mahindra has been seeking to sell a major stake in SsangYong as part of its global reorganization plan amid the COVID-19 pandemic.
The Indian parent has said it does not have a plan to inject fresh capital into SsangYong and will give up its status as the biggest shareholder of the Korean unit if it finds a new investor.
Mahindra acquired a 70 percent stake in SsangYong for 523 billion won in 2011 and now holds a 74.65 percent stake in the carmaker.
For all of 2020, SsangYong’s net losses widened to 478.5 billion won from 341.4 billion won the previous year. It logged net losses in the past 16 consecutive quarters through the fourth quarter.
Separately, the country’s bourse operator, the Korea Exchange, said SsangYong Motor could be delisted unless the company submits documents that show its debt settlement by the end of March.
SsangYong Motor’s capital base has already been erased as of December, and the trading of its shares has been suspended since Dec. 21.