SsangYong Motor will receive 40 billion won ($32 million) in special funds this month from its major shareholder, Indian carmaking conglomerate Mahindra & Mahindra, to urgently address liquidity issues, the Korean automaker said Sunday.
SsangYong said it finalized its plan to raise 40 billion won in new funds at an extraordinary general meeting Friday.
Mahindra will first invest in SsangYong as a loan, which will be converted to equity later upon Indian and Korean government agencies’ foreign investment approval.
Early this month, Mahindra withdrew its plan to inject fresh capital of 230 billion won into SsangYong. Instead, it was considering injecting up to 40 billion won in one-off funds over the next three months.
Upon securing liquidity, SsangYong expected to ease market jitters, including the alleged withdrawal of Mahindra from the Korean automaker.
“(The funding) will serve as an opportunity for Mahindra to dispel suspicions of withdrawal and confirm its commitment to strengthening support while maintaining ties with SsangYong Motor,” the automaker said.
SsangYong also said it had signed a deal to sell its Busan logistics center Tuesday. It explained that the sale is worth about 20 billion won and that the payment will come to SsangYong within this month to secure additional liquidity.
The Korean automaker estimated a total of 500 billion won will be needed over the next three years to normalize its management. It is making self-rescue efforts in anticipation of Mahindra’s investment and support from the Korea Development Bank.
SsangYong, which was in the red for 12 consecutive quarters until last year, has 70 billion won of KDB bonds maturing in July. If the automaker fails to repay or extend the bonds, it is likely to result in bankruptcy.
By Shin Ji-hye (email@example.com