This file photo provided by SsangYong Motor shows its plant in Pyeongtaek, Gyeonggi Province. (PHOTO NOT FOR SALE) (Yonhap)
SsangYong Motor Co. said Wednesday it has signed a conditional investment deal with a local consortium ahead of the auction later this month to find a new investor for the carmaker.
The Seoul Bankruptcy Court recently selected the consortium led by chemical-to-steel firm KG Group as the preliminary bidder for SsangYong Motor.
The new auction comes two months after local electric bus maker Edison Motors Co. failed to make a full payment of 304.8 billion won ($249 million) for the debt-laden carmaker by the March 25 deadline.
SsangYong and its lead manager EY Hanyoung accounting firm accepted the KG-Pavilion PE consortium as the consortium beat others in terms of acquisition price, fundraising plans, and employment guarantee period.
In the stalking horse bid, the preliminary bidder suggests its price for SsangYong ahead of the auction, and other bidders submit their prices in the auction. If a company submits a price higher than the stalking horse's price, SsangYong will ask the stalking horse if it can pay the highest bidding price to buy the carmaker.
Last month, four firms -- KG Group, Pavilion PE, EV parts maker EL B&T and underwear company Ssangbangwool -- submitted letters of intent to EY Hanyoung. KG and Pavilion PE formed a consortium after submitting LOIs.
The KG consortium and Ssangbangwool Group reportedly suggested bidding prices of 900 billion won and 800 billion won, respectively, for SsangYong. The prices are far higher than Edison's price.
Ssangbangwool said it will participate in the upcoming auction regardless of the preliminary bidder selection.
The Seoul Bankruptcy Court extended the deadline for SsangYong to find a new owner and submit a new restructuring plan by six months until Oct. 15.
SsangYong aims to select a preferred bidder at the end of June, sign a deal in early July, submit its rehabilitation plan to the court in late July and obtain the court's approval for its restructuring plan in late August.
SsangYong has been under court receivership since April 15, 2021, after its Indian parent Mahindra & Mahindra Ltd. failed to attract an investor amid the COVID-19 pandemic and its worsening financial status.
The latest deal's collapse due to Edison's failure to make payments marks yet another setback for the SUV-focused carmaker.
China-based SAIC Motor Corp. acquired a 51 percent stake in SsangYong in 2004 but relinquished its control of the carmaker in 2009 in the wake of the global financial crisis.
In 2011, Mahindra acquired a 70 percent stake in SsangYong for
523 billion won and now holds a 74.65 percent stake in the carmaker.
SsangYong's lineup consists of the Tivoli, Korando, Rexton and Rexton Sports SUVs. (Yonhap)