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Mahindra & Mahindra’s South Korean subsidiary, Ssangyong Motor Co (SYMC), filed for court receivership with a Seoul court on Monday, after it missed repayment of loans aggregating to around 60 billion won, or ₹408 crore.
SYMC has intimated to the Korean Stock Exchange about filing the application for commencement of rehabilitation procedure with the Seoul Bankruptcy Court under the Debtor Rehabilitation and Bankruptcy Act of South Korea, Mahindra said in a BSE filing.
Restructuring support
It has also applied for an Autonomous Restructuring Support (ARS) programme which is a court designed process, it added. 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, it said.
“However, some of its 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,” Mahindra said.
Also read: Mahindra arm Ssangyong misses repayment of loans worth ₹408 cr
SYMC has also applied for disposition of property preservation and an order of comprehensive prohibition. As part of the rehabilitation process, the courts, while admitting SYMC’s application, will generally issue a comprehensive stay or prohibition order to prevent SYMC’s creditors from enforcing any security claims, and a preservation order for SYMC not to engage in any disposal of property or assets without approval of the court so as to adversely impact the interests of the creditors, the filing said.
Also read: Why you should ride on Mahindra & Mahindra stock
Missed loan repayments
SYMC missed repayment of loans aggregating to around 60 billion won, or ₹408 crore, which were due and payable on December 14, 2020, Mahindra had said in a regulatory filing last week. SYMC has outstanding loans aggregating to 100 billion won, or about ₹680 crore. Of the total outstanding, which are covered under commitments made by the company to the bankers of SYMC, around 60 billion won (₹408 crore) is owed to JP Morgan Chase Bank, Seoul, 10 billion won (₹68 crore) to BNP Paribas, Seoul, and 30 billion won (₹204 crore) to Bank of America, Seoul, it had said.
SYMC has begun scouting for a buyer of M&M’s majority stake in it. This is part of M&M’s strategy to exit from loss-making subsidiaries and underperforming businesses. The move came after M&M rolled back plans to infuse fresh funding into SsangYong. In February, it had announced a fund infusion of 450-500 billion won (₹2,700-3,000 crore) to bring its South Korean subsidiary back to profitability by 2022. SYMC had posted its highest ever yearly loss in 2019. The Covid-19 induced lockdown worsened the situation for the South Korean company. The slowdown in automobile sales also impacted M&M’s ability to support its foreign partner.
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