|The main entrance of SsangYong Motor Company in Pyeongtaek, Gyeonggi Province. Korea Times file|
By Kim Yoo-chul
The Korea Development Bank (KDB), the major creditor of the ailing Korean automaker SsangYong, plans to offer the company "some financial help," after U.S.-based automobile distributor HAAH Automotive Holdings clarified its intention to acquire its managerial rights.
According to sources at investment banks here, HAAH recently delivered its detailed acquisition plans for SsangYong.
HAAH requested that SsangYong creditors, including the state-run bank, extend maturing debts and reset the stakeholder position to give it control before it makes an investment.
"If these conditions are met, then HAAH told SsangYong that it would invest up to 300 billion won," a source involved with the issue said. "In HAAH's proposal for SsangYong was a request for creditors to delay any announcement of an event of default (EOD) until the normalization of SsangYong's business operations."
An EOD is a condition specified in loan agreements that triggers a demand of payment by a lender and the start of default proceedings. The most common cause of default is the failure to make required payments on time. Mahindra & Mahindra, the main shareholder of SsangYong with 75 percent, is on track to review HAAH's proposal.
Given HAAH's "unconfirmed financing" ability and the suggestion that it isn't a "binding offer," some observers have questioned the validity of the proposal. However, the KDB plans to provide some financial assistance to SsangYong.
"The KDB-led creditors' financial help to SsangYong won't be that much as SsangYong still has to present specifics for a plan for survival," one banking source said.
KDB chief Lee Dong-gull earlier told reporters that SsangYong "should find new and substantial businesses." Mahindra has already approached the KDB to arrange funding for its Korean subsidiary.
While there is some speculation that Chinese automobile company Chery is hoping to control the Korean carmaker through HAAH acquiring a controlling stake, HAAH told The Korea Times recently that Chery has no ownership of HAAH.
"HAAH does have a technical cooperation agreement with Chery but it does not involve any ownership," HAAH Vice President Chris Hosford recently told the newspaper.