Mahindra-owned South Korean SUV manufacturer, SsangYong Motor Company, has filed for court receivership after it defaulted on loan repayment of about 60 billion won or ₹ 408 crore to three different banks. In a Bombay Stock Exchange (BSE) filing, Mahindra said that SsangYong has applied for the commencement of rehabilitation procedure with the Seoul Bankruptcy Court under the Debtor Rehabilitation and Bankruptcy Act of South Korea. The South Korean company has also applied for an Autonomous Restructuring Support (ARS) programme which is a court designed process. We did reach out to Mahindra for additional details on the matter, however, we are yet to receive an official reply from the company.
Similarly, in Korea, SsangYong, in its statement said, "SsangYong Motor applied for the court receivership procedure as a massive disruption in the operation is expected after the company could not reach an agreement to extend its loan repayment deadlines with foreign banks." The company has defaulted on loan repayments to three different financial institutions - about 20 billion Won ( ₹ 136 crores) to JP Morgan, 10 billion Won ( ₹ 68 crore) to BNP Paribas, and 30 billion Won ( ₹ 204 crore) to Bank of America. The total payment was due on December 14, 2020.
In its BSE filing, Mahindra said, "If the Court approves the ARS, SYMC will continue to function under the supervision of its Board and will negotiate with stakeholders to reach an understanding about a revival package which may include equity and debt financing and other related actions. However, some of its decisions will be subject to Court approval." The programme will give SsangYong up to three months to negotiate with stakeholders including creditors to resolve issues, delaying the court's decision.
SsangYong is burdened with high debt and its vehicle sales between January-November period fell to 96,825, down more than 20 per cent from a year earlier, the automaker's filing showed. SsangYong's total outstanding loans aggregate up to 100 billion Won, which is approximately ₹ 680 crore. Mahindra since June has been looking for a buyer for all or most of its 75 per cent stake in SsangYong, which it bought from near insolvency in 2010 but has struggled to turnaround.
Commenting on the situation, South Korea's trade ministry said in a statement, "Regardless of SsangYong's filing for court receivership, negotiations of SsangYong sale deal is still ongoing". Mahindra & Mahindra shares fell 3.3 per cent in their sharpest fall in eight weeks, while SsangYong closed down 19.2 per cent versus a 0.2 per cent rise on the broader KOSPI market.