SsangYong Motor Co., the South Korean unit of Indian automaker Mahindra & Mahindra Ltd., said on Monday it has canceled an agreement to sell its majority stake to Edison Motors Co. due to the bus maker’s payment default. electrical.
SsangYong announced the termination of the contract with a local consortium led by Edison, under which it offered to buy the SUV-focused automaker for 304.8 billion won ($249.1 million).
Edison Motors paid 10% of the acquisition money but failed to pay the remaining 274.3 billion won by the March 25 deadline.
“The contract was automatically canceled because the Edison Motors consortium failed to pay the balance of the acquisition five business days before the date of the meeting of creditors,” SsangYong Motor said in a regulatory filing.
SsangYong said it would look for a new buyer and submit a new restructuring plan to the Seoul bankruptcy court.
The collapse of the deal marks another setback for SsangYong, the struggling SUV maker which has been the subject of a court-led restructuring program since April last year after its Indian parent company failed to failed to attract an investor amid the COVID-19 pandemic and deteriorating financial situation.
Edison was not immediately available for comment.
In January, the Edison Consortium signed a final takeover agreement with SsangYong following approval of the acquisition plan by the Seoul Bankruptcy Court.
But Edison Motors has struggled to raise funds for the takeover deal as Edison EV, its main subsidiary involved in the financing, is struggling with its own financial troubles with consecutive operating losses.
SsangYong Motor’s union and a group of creditors made up of contractors also opposed the takeover, citing the low rate of debt repayment offered by Edison.
Edison Motors had asked the court to allow the creditors’ meeting to be postponed to buy time for the buyout process. The court was expected to issue its decision on the postponement request later in the day.
The creditors’ meeting, scheduled for April 1, will discuss whether to approve Edison’s proposed debt rescheduling plan.
Edison said he would set up a special purpose company to grow from 800 billion won to 1 trillion won starting this year to invest in a stake in SsangYong through various means, including a rights issue, loans and a bond issue, in order to achieve a turnaround within three to five years.
Edison said he aims to transform SsangYong into an automaker focused on electric vehicles over the next decade in line with changes in the auto market.
The Chinese company SAIC Motor Corp. acquired a 51% stake in SsangYong in 2004, but relinquished control of the automaker in 2009 following the global financial crisis.
In 2011, Mahindra acquired a 70% stake in SsangYong for 523 billion won and now owns a 74.65% stake in the automaker.
For all of 2021, its vehicle sales fell 22% to 84,106 units from 107,324 a year earlier amid the pandemic and chip shortages.
The SsangYong range includes the Tivoli, Korando, Rexton and Rexton Sports SUVs. (Yonhap)