As reported on just-auto last week, the Korean courts have postponed the final sign off of the recovery plan until December 11. However, the head of Ssangyong’s UK distribution operation tells just-auto that the company is still on track to have its new business plan approved.
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Ssangyong, which has debts totalling KRW1.23 trillion (US$1bn), in September submitted to the courts a rescue package that would weaken links to its biggest shareholder, China’s SAIC Motor.
The plan calls for converting KRW417bn won of debt into new shares and to repay the remainder within ten years.
It involves SAIC’s 51% holding being cut to 11.2% through a five for one write-down of its stake. Other shareholders would face a three for one reduction.
Although the company secured more than 90% of votes from collateral bondholders and shareholders, it only received 41.2% approval from its non-collateral bondholders after foreign bondholders led opposition.
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By GlobalDataPaul Williams, managing director of UK Ssangyong distributor Koelliker UK, is undeterred and believes that foreign corporate bondholders are simply looking for a better return.
“Technically this is a debt that has to be dealt with in the same way that other creditors have been, many of whom have exchanged debt for equity,” he says.
“But corporate bondholders simply look at the situation from a ‘financial return’ basis and will always object to the first offer made in order to try and get a better deal,” Williams maintains.
“And ultimately the court has the right to ignore their request and issue a ‘compulsory performance order’ under their jurisdiction to enforce the ruling made. To be balanced and fair they have decided to consider a revised offer before making a final ruling.”
Williams is convinced that the court will decide in favour of the recovery plan, as this now has the formal backing of major domestic creditors, national and regional governments and, crucially, its biggest creditor the Korea Development Bank. Moreover, he says, the Korean government would be on tricky ground politically if it favoured foreign money lenders over a plan that would keep a major domestic enterprise in business.
“We are on the right track to shortly seeing Ssangyong’s turnaround business plan approved and ready for implementation,” Williams says.
“We just have to be a little bit more patient.”
Dave Leggett
See also: SOUTH KOREA: Court delays Ssangyong rescue approval
