Ssangyong Motor is expected to enter a court led restructuring process this week after its sole prospective buyer failed to submit a letter of intent (LOI) to buy the South Korean automaker by a 31 March deadline.
The South Korean automaker filed for bankruptcy on 21 December 2020 after it failed to meet significant debt obligations, with creditors refusing to reschedule repayment deadlines. The company was given a three-month grace period from its debt obligations by the Seoul Bankruptcy Court while its parent company Mahindra & Mahindra negotiated its sale to a potential buyer
Mahindra had been in talks for months with US vehicle importer HAAH Automotive Holdings to sell most or all of its almost 75% stake in Ssangyong but the potential buyer failed to commit to the acquisition by the deadline set out by the bankruptcy court.
Ssangyong CEO Yea Byung-tae this week announced he was stepping down from his position after the parent company failed to secure the new investment.
In a resignation letter sent to local media, staff and fellow executives, he pointed out “securing new investment is taking longer than expected, and as the restructuring process is imminent, more complications and struggles are expected to lie ahead”.
The court has asked Ssangyong’s creditors to express their opinion on whether to begin the court-led debt rescheduling process immediately.
Korea Development Bank (KDB), the automaker’s largest creditor, told local reporters: “We have collected opinions from the other creditor banks and have yet to deliver our view on the court receivership to the court.”
The receivership process will determine whether the company will remain in business. A new investor is needed that will reach a debt settlement agreement with creditors and come up with a new business plan for the company.
Ssangyong said it would suspend production from 8 April for just over one week due to a shortage of semiconductors. The company had already halted production for long period in the first quarter due to a shortage of components with some suppliers holding back deliveries due to unpaid bills.