[ad_1]
NEW DELHI: Mahindra & Mahindra (M&M) announced on Friday that they are in talks with a potential investor to sell their majority stake in the South Korean branch SsangYong Motor Company (SYMC) which has already filed for bankruptcy, and plans to sign a non-binding agreement next week.
The Bombay-based auto major, which currently owns nearly 75% of the Korean company, plans to finalize the deal by the end of February.
“We are in discussions with a potential investor for a majority stake in SsangYong. We hope to conclude the term sheet with the investor next week,” M&M chief executive Pawan Goenka told reporters at a conference. virtual press.
On December 21, the local automaker announced that SYMC had filed for bankruptcy.
The loss-making company has filed an application to initiate rehabilitation proceedings with the Seoul Bankruptcy Court under South Korea’s Debtor Rehabilitation and Bankruptcy Act.
The struggling automaker also asked for an Autonomous Restructuring Assistance Program (ARS), a court-designed process.
“Under the ARS system, the court allows the company to find a solution on its own within a certain period of time and during this time the company is managed by its management and the court does not intervene,” said Goenka.
He added: “The court granted the ARS to SYMC and the date is February 28, so we have two more months to make a deal with the investor.”
If the deal goes through, things continue as normal and if the deal does not come to pass, SYMC goes into receivership and its management is taken over by the court, Goenka noted.
“It will be known on March 1 and we hope that during this two month period we will complete the deal with the investor. If the deal is done, the majority stake will be with the new investor, Mahindra will be in the minority with about 30 percent or less and the company will also do a 25 percent capital reduction, which is allowed under RBI regulations, ”he added.
Goenka also noted that the SYMC union supports the ARS process.
He did not, however, name the investor with whom negotiations were underway.
Develop more, Mahindra Group Group Deputy Managing Director and CFO Anish Shah said the company is optimistic a buyer can come in and continue SsangYong operations.
“If that doesn’t happen then the company will go through the pre-pack rehabilitation and there might be other options as well but in both scenarios from M & M’s point of view we would cease to be the majority shareholder before the end of this exercise, “he noted.
Commenting on the finances involved in SYMC, he said: “We have around Rs 980 crore, we have guaranteed Rs 680 crore in loans from foreign banks and 40 billion Korean won (around Rs 270 crore) which we have already put on loans. . So Rs 980 crore on equity and Rs 950 crore on debt. ”
The magnitude of the potential radiation will depend on the scenario that unfolds, Shah added.
SYMC has a reasonable amount of assets and therefore should be able to support both debt equity, he noted.
“M&M has no additional liability beyond these equity and debt numbers that we have shared,” Shah added.
In December 2020, M&M informed stock exchanges that SYMC had missed loan repayments totaling 60 billion Korean won (approximately Rs 408 crore).
The Korean automaker has outstanding loans totaling 100 billion Korean won (around Rs 680 crore) from Seoul-based branches of JP Morgan Chase Bank, BNP Paribas and Bank of America.
Already, JP Morgan has requested repayment of a loan worth 40 billion Korean won from SYMC and the South Korean automaker has expressed its inability to pay the amount now.
In April last year, M&M’s board rejected a proposal to inject new equity into SYMC.
The Mumbai-based auto major acquired the loss-making SsangYong in 2010, but has failed to topple it since despite several attempts.
M&M has since invested more than $ 110 million in the loss-making automaker. SsangYong has struggled with deteriorating profits since 2017 when it slipped into the red with a net loss of 66 billion won from net profit of 58 billion won in 2016. In 2018, its net loss fell to 62 billion won. billion won then jumped to 341 billion won in 2019.
Source link
