Mahindra & Mahindra’s South Korean-subsidiary SsangYong Motor Co has filed for court receivership after it defaulted on loan repayment of about 60 billion won (Rs 408 crore), according to a Reuters report quoting the automaker’s statement.
“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,” said the report.
Mahindra which holds a 74.65% stake in SsangYong had informed last week that SsangYong Motor had missed out on its loan repayment. SsangYong Motor Company has loans aggregating to 100 billion Korean Won (approximately Rs 680 crores), of which outstanding loans of 60 billion KRW (around Rs 408 crore) from JP Morgan Chase Bank, 10 billion KRW (around Rs 68 crore) from BNP Paribas and 30 billion KRW (around Rs 204 crore) from Bank of America were defaulted last week.
A receivership is a court-appointed tool that can assist creditors to recover funds in default and can help troubled companies to avoid bankruptcy. In the first instance, having a receivership in place makes it easier for a lender to recover funds due to them when a borrower defaults on a loan.
In the second case, a receivership may occur as a step in a company's restructuring process, with the goal of returning the company to profitability
The automaker said it had applied for an autonomous restructuring support program, which gives SsangYong up to three months to negotiate with stakeholders including creditors to resolve issues, delaying the court’s decision.
The report further states that South Korea’s trade ministry issued a statement saying “Regardless of SsangYong’s filing for court receivership, negotiations of SsangYong sale deal is still ongoing.”
SsangYong Motor has agreed to adjust the concerns of interested parties while the rehabilitation procedures have been suspended. During this time, the repayment burden of the principal loan and interest is lifted, and the company plans to complete the negotiations and apply to the court as soon as possible to withdraw the rehabilitation procedures.
An official source from SYMC, said; "We very much regret this situation which is the result of the difficulties being experienced from the worldwide Covid-19 situation, and the concern caused to our partners and stakeholders, especially our employees, sales networks and financial institutions. We are making every effort to transform the situation, and to build a more robust and competitive company for the future.”
In the meantime, SsangYong Motors UK continues to operate as normal. Kevin Griffin, managing director for the brand in the UK, said: “Whilst this situation is not ideal, I strongly believe that the Autonomous Restructuring Programme will result in the birth of a stronger company. I want to reiterate that our UK operations are totally unaffected, and we are very much open for business.”