Covering Damages
The aftermath of the debt-to-equity swap fiasco that led to Ssangyong’s court protection is turning out to be relatively benign, and Ssangyong construction projects both domestic and abroad have resumed work, with things quickly returning to normal.
According to financial sources on Feb. 11, the creditors of Ssangyong conducted a supervised credit risk review of 79 subcontractors that are owed 10 percent or more of their total outstanding receivables by Ssangyong.
Out of the five companies that were found to have a D rating, which effectively means removal, one company had been already put under court protection. Those that received a C rating were being led to workout, and were put in a corporate restructuring program supervised by creditors. Those given a B rating received rescue funding called the Fast Track Program. The remaining twenty-eight were in relative good health and received an A rating.
Many in financial circles had speculated that about 1,500 companies would default as a result of Ssangyong’s court protection. These companies were facing imminent bankruptcy with outstanding due amounts exceeding 180 billion won (US$169 million), including commercial bonds based on revenue collateral estimated at 70 billion won (US$65.7 million).
As such, the Financial Supervisory Service (FSS) and creditors conducted a credit risk review to assess the financial health of the subcontractors that had been working with Ssangyong E&C. It was to provide funding and recovery setup for companies that were hit by the liquidity crisis, and it was also the first time that creditors had taken part in assessing the credit ratings of subcontracting companies.
However, it turned out that the threat of widespread financial chaos and bankruptcy was less pronounced than many expected. Still, the FSS set extra precautions to watch the companies in the B-ratings bracket and make sure that funding and recovery programs are carried out as planned.
This seemingly has had a stabilizing effect on construction sites of Ssangyong E&C. There were several sites that experienced temporary work stoppage when court protection began in January, but in most places work has resumed. 18 sites abroad have also continued as usual.
A financial authority source said, “The threat of work stoppage impacting the company’s financial health both domestic and abroad, thereby hurting its credit ratings, is now gone.” Then he stressed, “With further funding through creditors, the idea is to make sure that construction will continue without disruption at Ssangyong E&C sites around the world. We will make sure of that.”