Mahindra & Mahindra has been looking to bring a new investor for its South Korean subsidiary SsangYong Motor Company and HAAH Automotive Holdings Inc was said to be in advanced talks with the automaker. Now, a new report suggests that the US-based import car distributor is said to be investing $258 million in SsangYong for a substantial stake in the company. The proposal was reportedly submitted last week but details are still under wraps about the stake HAAH will hold in the UV maker. At present, Mahindra holds a 74.65 per cent stake in SsangYong since 2010.
The report further suggests that HAAH Automotive has laid down stringent conditions for its investments that include the delay of SsangYong's debt repayment to its creditors. As per details released earlier this year, the company had a short-debt of 306 billion won to different banking institutions including JP Morgan, BNP Paribas, Bank of America Merrill Lynch, and owed 150 billion won to other foreign investors.
According to the report, while Mahindra has been looking to dilute its stake, investors have been of the demand that the Indian auto giant retain the controlling stake in SsangYong. This would mean that Mahindra will hold at least a 51 per cent shareholding in the Korean automaker for a loan rollover or extension. Foreign banks that service SsangYong's loans have informed that if Mahindra cedes control, it would jeopardise refinancing of its loans with the new buyer having to clear all outstanding dues before taking control.
With the debt accrued, HAAH's investment may not be enough to ascertain majority shareholding in SsangYong over Mahindra. The Korean auto giant had previously said that it required at least 500 billion won of fresh investment to normalise operations. HAAH may not have enough money to invest in SsangYong in the first place with only 23 billion won in annual sales.
Earlier this year, the Mahindra board passed a special resolution at its AGM moved the decision to reduce its shareholding to less than 50 per cent in the company. The board also rejected the proposal to induce fresh investment in the debt-ridden SsangYong to the tune of 230 billion won, but permitted only 40 billion won to keep the operations running. The Korean automaker since had to sell its service centres to raise capital and keep operations afloat.
More recently, SsangYong's external auditor had refused to sign its financial statement. The auditor cited discrepancies and its "doubtful existence" as the reason, even as the company posted an operating loss of 98.6 billion won ($82.3 million) in the first quarter of 2020. The numbers are only expected to fall further in the second quarter.
A spokesperson from HAAH Automotive Holdings was quoted saying that the company will be purchasing various vehicles from Chery along with parts sourced from North America will be assembled in an American factory, where the final vehicles will be produced. The new products will be sold under the brand name 'Vantas' in North America.