Bankruptcy court approves Ssangyong rehabilitation plan

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The Seoul Bankruptcy Court has approved a rehabilitation plan for Ssangyong Motor Company that includes issuing new shares to raise capital to pay creditors, according to local reports.

Last week, the country’s Fair Trade Commission approved the acquisition of a majority stake in the bankrupt automaker by a consortium led by steel and chemical company KG Group, after finding that the takeover would not harm market competition.

Earlier this week, major creditors including the Korea Development Bank agreed to the issuance of 93.31 million new ordinary shares by Ssangyong Motor at a price of KRW 5,000 per share, intended to raise KRW 467 billion ( $345 million) in cash, including creditor reimbursement costs. and subcontractors.

Under the plan, creditors would receive KRW 237 billion and contractors KRW 55 billion, just under 14% of the KRW 394 billion owed to them, while Indian parent Mahindra & Mahindra would receive KRW 7.4 billion, or 5.4% of its debt.

Ssangyong has also agreed to convert remaining debt owed to contractors and Mahindra & Mahindra into Ssangyong shares in a debt-for-share swap. Two reverse stock splits will see the Indian company’s stake in Ssangyong sharply reduced from the current level.

Consortium KG Group would become the automaker’s largest shareholder with a 61% stake after its winning bid of KRW 950 billion ($736 million), including KRW 600 billion in working capital, was approved by the bankruptcy court at the end of June. A deadline of October 15 has been set for the completion of the acquisition.

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