Mahindra's Korean subsidiary Ssangyong Motor files for bankruptcy

Mahindra & Mahindra (M&M) on Monday informed that its South Korean material subsidiary SsangYong Motor Company (SYMC) has informed the Korean Stock Exchange regarding the commencement of the rehabilitation procedure with the Seoul Bankruptcy Court.

M&M in a notification to the stock exchanges said, "SYMC has today intimated to the Korean Stock Exchange, about filing an application for commencement of rehabilitation procedure with the Seoul Bankruptcy Court under the Debtor Rehabilitation and Bankruptcy Act of South Korea. SYMC has also applied for an Autonomous Restructuring Support (ARS) program which is a court designed process."

The development comes a week after the struggling automaker missed the repayment of Rs 480 crore (60 billion Korean Won) to JP Morgan Chase Bank, South Korea, which was due and payable on December 14.

The notification further says, if the Court approves the Autonomous Restructuring Support (ARS), SYMC will continue to function under the supervision of its Board and will negotiate with stakeholders to reach an understanding about a revival package which may include equity and debt financing and other related actions. However, some of its decisions will be subject to Court approval.

The Seoul Bankruptcy Court will deliberate and review the application and relevant documents submitted by SYMC to determine whether or not the Court will commence the restructuring process of SYMC.

SYMC has also applied for disposition of property preservation and order of comprehensive prohibition. As part of the rehabilitation process, the Courts while admitting SYMC's application, will generally issue:-

A comprehensive stay or prohibition order to prevent SYMC's creditors from enforcing any security claims.

A preservation order for SYMC not to engage in any disposal of property or assets without the approval of the Court to adversely impact the interests of the creditors.