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SsangYong Motor Co., the South Korean unit of Mahindra and Mahindra Ltd, has filed for bankruptcy about a week after failing to repay loans.

The development underscores the failure of Mahindra to make headway in the international automotive market through acquisitions as well as new projects. Mahindra recently decided to shut down its US-based electric scooter unit, GenZe, as part of its plan to sell loss-making units.

SsangYong filed an application for initiating 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.

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This follows the sport-utility vehicle maker failing to repay loans of about 60 billion Korean won, or 408 crore, due and payable on 14 December to lenders, including JP Morgan Chase, Bank of America and BNP Paribas.

“SsangYong has also applied for an autonomous restructuring support (ARS) programme, 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," Mahindra said in a separate filing to BSE.

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

This is not the first time that SsangYong has filed for bankruptcy. In fiscal year 2011, Mahindra acquired a 70% stake in SsangYong for more than 2,100 crore, saving the latter from bankruptcy.

The Indian company gradually increased its share to 74.65% with the last equity infusion made in January last year.

Mahindra in a 12 September letter to BSE informed that more than 98% of shareholders approved the company’s decision for either transfer, dilution or cessation of controlling stake in SsangYong.

This followed Mahindra’s failure to turnaround the fortunes of SsangYong under its decade-long ownership.

In April, Mahindra decided to stop any further equity investment in SsangYong while making a one-time investment of 40 billion Korean won (about 270 crore) in the June quarter for maintaining business continuity.

Almost 80% of Mahindra’s March quarter loss was because of the 2,719 crore impairment charge it took because of accumulating losses at SsangYong, Mahindra executives said 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 ended 30 September despite reducing fixed costs.

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