Ssangyong Motor gets 2-months' grace before court-led restructuring

Ssangyong Motor Co. has received court approval for a two-month suspension of its obligations to repay debt as the troubled automaker is seeking to find a new investor in the South Korean unit of India’s Mahindra and Mahindra Ltd.

According to legal sources on Dec. 28, a Seoul court gave Ssangyong the nod to run its business as usual until Feb. 28, by which time it is obliged to reach a negotiated debt repayment settlement with its creditors.

Under the self-restructuring support program, called ARS, the Korean automaker will also be asked to conclude investment talks.

Last week, the Korean utility vehicle maker sought insolvency protection by filing for court receivership after it missed a 60 billion won ($55 million) loan repayment to Bank of America and other foreign lenders. At the same time, the company also sought a three-month grace period before the court begins rehabilitation procedures.

Ssangyong has said it aims to revoke its request for receivership and return to normal after rescheduling its debt obligations during the grace period. If this fails, the company will be placed under scrutiny for possible liquidation.

The carmaker has been reeling under snowballing debt amid falling exports in the absence of new models. As of the end of September, its total liabilities stood at 1.59 trillion won ($1.45 billion).

Ssangyong’s request for receivership comes as its Indian owner refused to inject fresh funds to keep its Korean unit afloat. Mahindra has said it is willing to give up its management rights if Ssangyong finds a new investor.

In September, HAAH Automotive Holdings Inc., a US automobile distributor, offered to invest 300 billion won ($258 million) in Ssangyong as part of its bid to acquire a significant stake in the Korean automaker.

As Ssangyong was teetering on the brink of a collapse, its subcontractors refused to supply auto parts, forcing the automaker to halt operations for two days – Dec. 24 and Dec. 28.

Write to Jeong Min Nam at peux@hankyung.com
In-Soo Nam edited this article.