Court delays decision for SsangYong's new owner

Asia's Tech News Daily

Court delays decision for SsangYong's new owner

SsangYong Motor Pyeongtaek plant in Gyeonggi Province / Yonhap

Seoul Bankruptcy Court potstones decision to select preferred bidder of SsangYong Motor

By Kim Hyun-bin

The Seoul Bankruptcy Court has postponed the scheduled selection of a preferred bidder for the ailing SsangYong Motor, Wednesday, as the court had concerns about the fundraising ability of the two candidates in terms of reviving the financially struggling carmaker.

Industry officials told The Korea Times Wednesday afternoon that the court would name the preferred negotiator for SsangYong, which is under court receivership, by Friday afternoon.

The Seoul Bankruptcy Court had originally been scheduled to select one preferred negotiator and an alternative candidate by Wednesday. A consortium led by Edison Motors, and another local consortium led by EV firm Electrical Life Business and Technology (EL B&T) both submitted their proposals to the court.

Originally, the court was scheduled to select a preferred bidder late last month and enter official acquisition procedures. EL B&T submitted a proposal in the early 500 billion won and the Edison Motors-led consortium submitted a proposal of 200 billion won, which is much lower than the estimated 1 trillion won needed to revive SsangYong Motor, according to local automotive sources familiar with the issue.

The lower-than-expected price tag led the court to request a price revision from the two candidates as it deemed the proposed price insufficient.

“In any acquisition procedures, the top priority is the funding power of the buyer for a smooth acquisition procedure,” an industry official said. “SsangYong Motor is under its third round of selloff procedures and the court found the bidders to have lacked the funds necessary to manage the company after acquisition.”

The revised price proposal has not been unveiled but it is expected to include SsangYong’s debt, as well as other costs such as funds for research and development.

The court will thoroughly look into not only each consortium’s funding power but also their management plans, as the automotive industry is transitioning swiftly to electric vehicles from conventional combustion engine cars, launching new software and independent platforms that have widened the gap with SsangYong, which mainly manufactures combustion engine trucks

“The candidates should come up with a specific and realistic business plan to bring to the table,” Korea Development Bank Chairman Lee Dong-gull said.

“Once a preferred bidder is selected as the investor, the government, company and union will come together to brainstorm a normalization plan.”

Court delays decision for SsangYong's new owner

Workers assemble cars at the SsangYong Motor Pyeongtaek plant in Gyeonggi Province. / Courtesy of SsangYong Motor

EL B&T was established in 2000 specializing in electric vehicles, but it is said to have no EV-related patents or experience manufacturing EVs with its own technology, raising doubts over the company’s EV manufacturing capabilities.

In addition, the company only reported 100 million won in sales and even if they get enough funds through the consortium, it will still raise questions over how EL B&T could financially manage SsangYong, which is estimated to be worth 1 trillion won.

The Edison Motor-led consortium includes the Korea Corporate Governance Improvement (KCGI) and Keystone Private Equity. Edison Motor also faces financial issues to acquire SsangYong, as its total sales last year accounted for 98.7 billion won.

Edison Motors plans to unveil 30 EV models by 2030 after acquiring SsangYong but the company specializes in assembly and selling EVs with most parts imported from overseas, which also raises doubts over the company’s capabilities to manage SsangYong.

Since April 15, SsangYong Motor has been under a debt-rescheduling process after its Indian parent company Mahindra & Mahindra failed to attract any investors due to the company’s worsening financial troubles and the prolonged COVID-19 pandemic. In December 2020, the company filed for court receivership after failing to obtain approval for its 165 billion won ($148 million) in loans from creditors.

Court receivership is one step before bankruptcy provided under the country’s legal system, in which the court decides whether and how to revive the company.

SsangYong is going through its third round of selloff procedures, with the first being China-based SAIC Motor Corp. which acquired a 51 percent stake in the Korean company in 2004 but relinquished its control in 2009 during the global financial crisis.

In 2011, Mahindra acquired a 70 percent stake in SsangYong for 523 billion won and now holds a 74.65 percent stake in the firm.

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