Debt Repayment
Korea’s number 13 constructor Ssangyong E&C has asked its creditors for a debt workout program. However, as some creditors remain negative regarding the workout, chances of court receivership cannot be ruled out.
Ssangyong and its creditors including the Korean Asset Management Corporation (KAMCO) said on February 24 that they agreed to apply for the workout program this week because the company has wiped out its capital and its liquidity problem is too serious. It’s been eight years since the company completed the workout program in October 2004.
A Ssangyong official said, “We need to get out of the capital erosion status by the end of March in order to avoid delisting the Korea Exchange (KRX). But we have decided to ask for a workout program because we are running out of time.”
Ssangyong E&C recorded two-year consecutive net losses in 2011 and 2012. Now the KRX has suspended trading of the company’s shares. If the company fails to pay a total of 60 billion worth of debts and notes due February 28, it will face the risk of bankruptcy.
If being placed under the workout program, Ssangyong plans to freeze the creditors’ execution of debt claim; normalize its operation through capital reduction, additional paid-in capital increase and debt-for-equity swap; and then proceed with sale of the company.
But the KAMCO, which has already handed over its stake in Ssangyong (38.75%) to a Korea Deposit Insurance Corp’s affiliate, is negative about the idea of additional capital increase, and other creditors say they cannot bear the burden of additional capital increase without the KAMCO’s participation. Especially, some creditors say they will not agree on the workout program unless they figure out the company’s bad status in detail and they will not hesitate to ask for court receivership.
A source from the creditors said, “It is difficult to continue the workout program only by the support of the creditors, if the government gives no help. If needs arise, we want to go under court receivership and conduct clear due diligence over the company’s overseas operations”
In the meantime, the KAMCO passed the motion to discharge CEO Kim Suk-joon for his bad management in the management assessment committee last month, just before it handed over its holdings. So, attention is paid to if Kim will actually resign.