Ssangyong declares bankruptcy, top executives resign
Ssangyong is now at the cliff’s edge. After failing to repay its creditors, as well as not getting fresh equity from parent company Mahindra last April, the company recently filed for bankruptcy.
The company filed for Chapter 11 after defaulting on loan payments that amount to KRW 100 billion (around PhP 4.3 billion). The automaker failed to extend its deadline for repaying loans to three foreign banks - JPMorgan Chase (KRW 60 billion), BNP Paribas (KRW 10 billion), and Bank of America and BofA Securities (KRW 30 billion).
Not only do they have to pay KRW 100 billion, but they also have yet to repay the KRW 90 billion to the Korean Development Bank. If they fail to pay this loan, the automaker’s arrears will balloon to KRW 190 billion, plus interest. Combined with Ssangyong facing a liquidity crisis since Mahindra pledged no new investment, Ssangyong will now only have three months to strike a deal with a potential buyer or negotiate a restructuring plan with creditors.
To make matters worse, all Ssangyong executives have resigned from their posts - leaving the company in a very fragile state. The stocks of the company plunged nearly 20% compared to previous days after news of Ssangyong filing for Chapter 11 spread.
With the company now in dire straits, does this mean it will get a bailout from the South Korean government? Sadly, that might not be the case as the brand has not been competitive enough for the past few months. Also, the COVID-19 pandemic has resulted in a significant drop in sales.
More importantly, what does this mean to the local distributor currently handling Ssangyong Philippines? Will they have to make sweeping changes while the company is restructuring during the bankruptcy period?
With Ssangyong only having several months to find a way to manage itself, the company has to strike a deal fast or find a new buyer to help them out of their grave predicament.