Mahindra's SsangYong close to signing binding agreement with US firm, Korean media reports

MUMBAI: Mahindra and Mahindra’s overseas subsidiary SsangYong Motor was close to signing a binding investment agreement with US-based HAAH Automotive Holdings, Korean media reported on Monday citing unnamed sources.

“SsangYong Motor plans to sign an investment agreement with HAAH sometime this week, at the earliest,” an unnamed automotive industry source was quoted as saying by the Korea Times. The planned agreement would likely be a “binding offer,” the source further said.

SsangYong’s shares touched the upper circuit of 30% to end at 5,620 won per ordinary share on the KOSPI, the Korean publication further reported.

HAAH Automotive Holdings is a California-based car distributor and is partly owned by China’s Chery Automobile Company. The company was expected to submit its final investment proposal in the coming 7-10 days, ET reported on Monday.

Mahindra had earlier announced that it will not make any further investments in the ailing SUV-maker and wanted to give up its controlling stake after being unable to turn around the operations of the company. The company’s board moved a special resolution at its AGM to reduce its shareholding in SsangYong to less than 50%, an indication of a new investor coming in rather than a complete sell out. Mahindra currently holds a 74.65% stake in SsangYong.

Mahindra had prepared a proposal earlier this year to infuse 230 billion won in SsangYong, but it’s board rejected the proposal last April, instead infusing just 40 billion won, enough to run operations for three months. In the face of rising debt, SsangYong sold one of its service centres located in the Guro district in Seoul to an asset management company, raising $147 million.

Foreign banks servicing SsangYong’s loans have informed that if Mahindra cedes a controlling stake, it would jeopardise refinancing of its loans with the buyer having to clear all outstanding dues before taking control. As of end March, SsangYong has USD 322.4 million short-term loans, to be repaid before a year with 167 billion won from JP Morgan, BNP Paribas and Bank of America.


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