| Front view photo of Ssangyong Motor Company (provided by Ssangyong Motors) © News 1 |
Ssangyong Motor is betting life and death on the P plan (Pre-packaged Plan) that was taken out as the last card. Ssangyong Motor’s plan was delayed a bit as negotiations with major shareholder Mahindra and potential investor HAAH Automotive (HAAH) were difficult, but it seems that it is making a last-minute spurt towards the goal of the P plan.
The P plan is a restructuring method in which creditors inject new funds when the court quickly reduces existing debt. It is a restructuring method that combines forced debt adjustment in the corporate rehabilitation procedure (court administration) and a workout that provides smooth new funding, and the court is forced to manage the court in an ultra-short term for 2-3 months.
In the financial sector and in the industry, it is analyzed that the establishment of a cause for support from the Korea Development Bank is the most important factor for the success of Ssangyong Motor’s P plan. In the meantime, the KDB said that it would review support only if the rehabilitation plan contained the potential investors’ pre-investment, union cooperation, and Ssangyong Motor’s future business potential. However, it is still unclear whether the P plan will be realized. At the crossroads between rehabilitation and normal corporate rehabilitation procedures (legal management) after attracting investors, attention is focused on how Ssangyong Motor can create a rehabilitation plan.
Ssangyong Motor is having a hard time every day. Some conglomerate parts makers and small and medium-sized partners requested Ssangyong Motor to pay cash for the payment, and stopped supplying parts to stop vehicle production. Ssangyong Motor plans to resume production after the Lunar New Year holiday, but I can’t even guarantee this.
Ssangyong Motor is concentrating on the progress of the P plan, although it is having difficulties in vehicle production. If only the P plan is successfully operated, the crisis can be overcome at once. Earlier this month, the P-plan was raised, but Ssangyong Motor plans to develop a rehabilitation plan after completing consultations with Mahindra and HAAH to proceed with the creditor consent procedure. An industry official said on the 14th, “Since potential investors also show strong willingness to acquire Ssangyong Motors, Ssangyong Motors is actively pursuing the P plan.”
Ssangyong Motor’s rehabilitation plan is expected to contain details for agreement between Mahindra, HAAH, and creditors, Ssangyong Motor’s debt settlement plan, and plans to secure future business feasibility.
The key is whether or not HAAH is invested. With HAAH’s investment, the KDB can provide financial support. However, neither Saneun nor HAAH are thinking of backing down a bit. In the end, in order to solve the sluggish situation for Ssangyong Motor, it is necessary to create an environment in which HAAH can induce investment, receive investment, and even draw financial support from KDB.
To this end, Ssangyong Motors is first discussing the P plan with Mahindra. Even without Mahindra’s agreement, there was no problem with the P plan, but as property exceeded debt due to the rise in land prices such as Ssangyong Motor’s Pyeongtaek plant recently, Mahindra’s agreement was necessary.
According to the legal community, it is possible to initiate a P plan even without Mahindra’s consent, but as assets become more than debt, the majority shareholders have the right to exercise voting rights when deciding to initiate rehabilitation procedures in the future. If Mahindra disagrees with the P plan, it could be finally rejected. In order to avoid such risk factors, Ssangyong Motor is also negotiating a P plan with Mahindra.
An automobile industry official also said, “A discussion will be made over how much Mahindra’s stake in Ssangyong Motor (74.7%) will be reduced.” It is said that the discussion will proceed in the order of lowering Mahindra’s stake in Ssangyong Motor and raising HAAH to become the largest shareholder by participating in a capital increase of 250 million dollars (280 billion won). Some observers say that Mahindra may agree to Ssangyong Motor’s P plan and turn a bargaining course, but it is not yet easy to guess Mahindra.
The Ssangyong Motors union is also in a position to cooperate for a successful sale. The union of Ssangyong Motors recently asked for help from the government and creditors, promising to fulfill its responsibilities and roles as much as possible for the success of the sale.
Sangeun Lee Dong-geul, chairman of Sangeun Lee, proposed a three-year extension of the validity period of a collective agreement and banning strikes before turning to surplus as a condition of support for Ssangyong Motor, but the industry analyzes that an agreement can be reached. The Ssangyong Motors union has not engaged in any industrial action until now since the declaration of no dispute in 2009. Another condition, the issue of extending the validity period of collective agreements by three years, may be an issue.
The issue of securing the future business potential of Ssangyong Motor is also one of KDB’s support requirements. When Ssangyong Motors submits a rehabilitation plan, KDB plans to discuss future business feasibility issues in consultation with an external professional agency that can objectively judge. The industry is questioning whether Ssangyong Motor will continue to grow. Already, automakers are focusing on eco-friendly vehicles such as electric vehicles, while Ssangyong’s main focus is on diesel cars and SUVs. In addition, even in the flagship car model, it is behind competitors. San-eun is also well aware of this, but it is noteworthy what plans Ssangyong will present.
The ARS program, which Ssangyong Motors applied to the rehabilitation court with an application for commencement of rehabilitation procedures, is valid until February 28th. Of course, the court plans to give more time if there is a request for an extension, but the later the P plan starts, the more likely it is that it will face corporate rehabilitation procedures. Ssangyong Motor also plans to submit a rehabilitation plan to the court within this month. Therefore, immediately after the Lunar New Year holiday, Ssangyong Motor’s fate is expected to be more active between stakeholders.
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