Nov. 6, 2009 (The Korea Times) -- By Park Si-soo
Staff Reporter
A Seoul court delayed its decision on whether to approve a turnaround plan by Sssangyong Motor, a troubled South Korean carmaker, Friday, after the company's foreign creditors voted against the scheme.
Ssangyong, majority-owned by China's Shanghai Automotive Industry, said that it would cut the Chinese parent company's share from the current 51 percent to 11.2 percent, and repay its 1.23 trillion won (about $1.04 billion) in debt over the next 10 years.
The Seoul Central District Court will convene a meeting on Dec. 11 with the stakeholders of Ssangyong to vote again on a revised turnaround plan.
According to the court, Ssangyong's turnaround plan gained the support of only 41 percent of the company's creditors.
To win an approval, more than three-quarters of bondholders and half of shareholders must vote to approve the plan for a capital reduction and debt-to-equity swap, the court said in a statement.
"It's a regrettable decision," Lee Yoo-il, a court-appointed manager for the company, told reporters following the decision at the court in southern Seoul. "We will make utmost efforts to get an endorsement in the second round of talk."
Ssangyong, a former affiliate of China's Shanghai Automotive Industry Corp. (SAIC), turned in the plan to the court on Sept. 15.
The turnaround plan includes writing off about 80 percent of shares owned by its former owner SAIC, which will reduce its stake from 51 percent to 11.2 percent, and converting 393 billion won ($334.7 million) in debt into new shares.
Market observers expected the plan to be approved, clearing the way for the debt-stricken automaker to receive an emergency cash infusion from overseas investors. Based on the speculation, shares of the motor company jumped 14.87 percent to close at 3,205 won Friday.
The country's smallest automaker faced its worst ever credit crunch earlier this year after being squeezed between the global financial crisis that hit its domestic sales and ensuing investment suspension by SAIC.
Grappling with deepening financial woes, the management slashed about 30 percent of its assembly workers, or 2,130 jobs.
The business-labor conflict climaxed as hundreds of assembly workers fallen prey to the massive layoff, a key part of its restructuring plan, took over several of its building in its main plant in Pyeongtaek, Gyeonggi Province, and locked out management for more than two months.
The 77-day-old protest, often turned bloody, was over in earlier August after a heavily-armed police SWAT team rappelled from helicopters and stormed buildings occupied.
Hit by the protest, Ssangyong said it sustained 316 billion won in production losses.
Ssangyong, whose product lineup is focused on Sports Utility Vehicle (SUV) and gas-guzzlers, is reportedly negotiating with two or three foreigner investors for a possible sale.
