Edison steps closer to SsangYong takeover with court’s approval

South Korean electric carmaker Edison Motors stepped closer to acquiring major stakes in debt-laden SsangYong Motor on Monday, after the two firms clinched a deal following the court’s approval on the same day. 

What remains for Edison is the agreement from the two-thirds of SsangYong’s creditors on the financially troubled SUV maker’s rehabilitation plan, undergoing the same process as a decade earlier. 

The carmaker has been under court receivership for the second time in April, after its Indian parent Mahindra & Mahindra failed to attract an investor amid a continued pandemic situation.

Under the court-led sale procedure, SsangYong’s rehabilitation plan should be submitted by March 1. 

In 2009, SsangYong’s overseas creditors disapproved the carmaker’s plan. But the Seoul Bankruptcy Court forcibly pushed ahead with the approval, only to exit in 2011 following the Mahindra & Mahindra takeover.

Some 2,600 employees were laid off at that time, accounting for approximately 36 percent of its workforce.

It remains unclear if creditors will agree this time, as the main creditor Korea Development Bank has been naysaying Edison Motor. KDB has said its SsangYong stabilization plan lacks credibility.

KDB has made it clear that there will be no financial support unless the company has a clear and sustainable business plan for SsangYong Motor, and requested SsangYong Motor to present a verification of its financial and technological capability from a third party.

Following the key funding partner Keyston’s dropout from the consortium last week, financing seemed unclear in the effort to save the automaker with some 700 billion won debt. But another partner, Korea Corporate Governance Improvement, said it will attract additional investment through a global investor for financing.

Market insiders say KCGI will have to push ahead with using SsangYong’s Pyeongtaek factory as collateral, so the creditors’ debts are cleared by SsangYong with the acquisition and the part of the existing debt is cancelled. 

Although the two carmakers faced differences over management rights, the value of the takeover and the scope of sharing technology, they agreed that Edison would make a 304 billion won ($253.5 million) investment in SsangYong, about 5.1 billion won less than the original plan. 

Edison has also settled at not requiring data on SsangYong’s core technology, and both agreed to improve the interior design and the front grille of SsangYong’s future models.

According to Edison Motors CEO Kang Young-kwon, the company will seek to change the current SsangYong brand and logo.

"We will look for the right timing to change the logo since it costs money," Kang said in an interview with a local media outlet.

By Kim Da-sol (ddd@heraldcorp.com)