SOUTH KOREA: Court delays Ssangyong rescue approval

By just-auto.com editorial team | 6 November 2009

A South Korean court on Friday delayed its decision on whether to approve a rescue plan for debt-burdened carmaker Ssangyong Motor after creditors failed to agree on it.

The court said the next hearing will be on 11 December if creditors agree that the court should continue with the case, AFP reported.

Ssangyong, which has debts totalling KRW1.23 trillion (US$1bn), in September submitted to the court a rescue package that would weaken links to its biggest shareholder, China's SAIC Motor.

The plan calls for converting KRW417bn won of the debt into new shares and to repay the remainder within 10 years.

It involves SAIC's 51% holding cut to 11.2% through a five for one writedown of its stake. Other shareholders would face a three for one reduction.

Ssangyong, the country's smallest automaker, was granted court protection from creditors in February in exchange for massive layoffs and cost savings, AFP noted.

The layoffs sparked a violent industrial dispute that led to strikers taking over a company plant for 77 days. The occupation saw clashes between the workers and riot police that led to more than 100 injuries.

Ssangyong spokesman Choi Jin-Ung said foreign creditors led objections to the turnaround plan.

"I believe foreign creditors do not want Ssangyong to go bankrupt," he told AFP. "They are saying that Ssangyong will come up with a better plan for its turnaround."

Ssangyong lurched into crisis amid slow auto sales, especially for its gas-guzzling SUVs. Both SAIC and its main South Korean creditor, the state-run Korea Development Bank, refused to bail it out.