SsangYong Motor Co. is prepping to file for a prepackaged bankruptcy, a speedier turnaround with the help of creditors, after winding up talks with a new potential investor.
SsangYong Motor CEO Yea Byung-tae said the company would be drawing up a prepackaged prospectus with HAAH Automotive Holdings, a candidate to buy stake from Indian parent Mahindra & Mahindra, according to industry sources on Thursday.
A prepackaged bankruptcy was instituted in 2016 in Korea to expedite court process for a corporate turnaround when deemed the company is savable. It requires approval from creditors as they would have to write off existing debts or shoulder new funding.
Whether the main creditor Korea Development Bank will accept the plan however is uncertain. The state-led bank earlier warned that SsangYong could not receive any additional funding unless the union promises not to strike until business normalization by stretching the binding period for the collective bargaining terms to three years instead of annual renewal.
Originally the automaker was given Feb. 28 as deadline to solve its default crisis and avoid the court-led receivership. Mahindra & Mahindra and HAAH Automotive Holdings have not reached an agreement for stake sale.
SsangYong Motor has debt obligations of 180-200 billion won ($161.7-179.6 million) promissory notes due on Friday to its parts suppliers.
Amid stalled talks, the government on Friday decided to provide financial aids to the parts suppliers of SsangYong under trouble due to delayed payment dues. State-run banks and funds will allow rollover of their existing loans.
By Yoon Won-sup, Seo Dong-cheol and Lee Ha-yeon
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