KDB refuses to back SsangYong Motor with bailout fund

Korea Development Bank, South Korea’s policy lender, on Wednesday refused to support the liquidity-stricken SsangYong Motor using its bailout fund of 40 trillion won ($32.95 billion) created to extend a lifeline to local companies suffering from the fallout of the novel coronavirus.

“Money is not necessarily everything for a company’s survival,” KDB Chairman Lee Dong-gull told reporters at a teleconference. “It takes money for a company to get through hardships, but much more is needed. It needs a strong business model. We doubt whether SsangYong stays true to its willingness to survive on its own.”

The contingency fund created through law revisions in April “does not intend to back companies in a precarious position even before the coronavirus outbreak,” said KDB Vice President Choi Dae-hyon, urging SsangYong not to deny responsibility and to address its financial strain.

In the meantime, KDB vowed to extend loan repayment relief for 90 billion won lent to SsangYong.

The remarks came after its parent Mahindra & Mahindra’s Managing Director Pawan Goenka said Friday the firm was working to find ways to secure investment in the indebted SsangYong Motors, so the Indian carmaker may opt to exit from the company. In April, Mahindra said it would not invest further in SsangYong.

This is part of its bid to review loss-making businesses and give up control in order to pick up the pieces, as Mahindra earlier reported a consolidated net loss of 19.55 billion rupees ($256 million), or roughly 310 billion Korean won, in the first quarter, a turnaround from its profit-making status.

Choi said the bank felt sorry about Mahindra & Mahindra, but added it was in talks with the current SsangYong shareholder to maintain its investment in the loss-making Korean sport utility vehicle maker and keep an earlier pledge to carry out additional investment in SsangYong.

Moreover, KDB said it was urging Mahindra to extend its loan to SsangYong that is set to reach maturity starting as early as June.

Also during the teleconference, Choi urged Hyundai Development Co., a proposed buyer of the indebted Asiana Airlines, to come to the negotiating table instead of exchanging letters to rediscuss the deal, and that the bank will review all possible plans if the HDC consortium gives up on the acquisition of the air carrier.

Chairman Lee also said the lender has already responded to HDC’s statement that it had spotted “negative factors.”

By Son Ji-hyoung (consnow@heraldcorp.com)