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Mumbai: Mahindra & Mahindra Ltd’s (M&M) South Korean subsidiary SsangYong Motor Co. (SYMC) has filed an application for commencement of rehabilitation procedure with the Seoul Bankruptcy Court under the Debtor Rehabilitation and Bankruptcy Act of South Korea, the cash-strapped carmaker said in a regulatory filing to the Korean Stock Exchange on Monday.

The move comes after SsangYong failed to repay loans of about 60 billion Korean won, or 408 crore, due and payable on 14 December to lenders, including JPMorgan Chase, Bank of America and BNP Paribas.

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“SsangYong has also applied for an Autonomous Restructuring Support (ARS) program, which is a court-designed process. If the court approves the ARS, SsangYong 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," parent company M&M said in a filing to BSE.

While some of SYMC’s board decisions will be subject to court approval, the Seoul Bankruptcy Court will deliberate and review the application and relevant documents submitted by SYMC to determine whether or not the court will commence the restructuring process of SYMC, it added.

Earlier in a letter dated 12 September, M&M had informed that over 98% shareholders had approved the company’s decision to transfer/dilution or cessation of controlling stake in its Korean subsidiary SsangYong. This followed when the Indian vehicle manufacturer failed to turnaround the fortunes of SYMC under its decade-long ownership.

In April, M&M took a call to stop any further equity investment in SYMC while investing a one-time 40 billion Korean won (about 270 crore) through the June quarter for maintaining business continuity.

Almost 80% of March quarter losses triggered by the 2,719 crore impairment costs came from the accumulating losses at SsangYong, M&M management had told Mint in June.

Battered by the pandemic, SsangYong has continued to post losses through the March, June and September quarters this year too. It has accumulated operating losses of 309 billion Korean won (close to 2,100 crore) during the three quarters ending September this year despite cutting down fixed costs.

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