SsangYong's plans to sell to Haah Automotive hits roadblocks


Roadblocks could have come in the way of a change of control in SsangYong Motors even as Mahindras are battling against time to revive their ailing Korean venture.

Informed sources say valuation issues may have cropped up with Haah Automotive and the reason for not being able to conclude the stake sale as yet. ” We have not been able to agree to certain financial terms with Haah as yet , ” said one person in the know.

However negotiations are going on and progress is being made , said the person quoted above with the deal likely to see some kind of conclusion before the year end.

So with only this investor (Haah) in the fray , It is not clear how Ssangyong will manage in the interim for working capital requirements.

SsangYong is in desperate need of funds to stay afloat post parent company Mahindra deciding to let go of its control.

In September Haah Automotive made an “initial” offer of $258 million for a substantial stake in SsangYong Motors.

After paying Rs 2,100 crore ($463 million) for the purchase of the Korean car maker a decade ago and investing over $110 million , this offer by Haah is considered way too low and could be the reason for the valuation deadlock, say sources.

To an email query , Mahindra said “we have no comments to offer on Ssangyong and Haah”.

Haah Automotive to an email query said ” we do not comment on rumours and speculation.”

Haah has also sought an extension of the loan repayments and their terms might not get acceptable to the lenders.

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Banks like JPMorgan, BNP Paribas, Bank of America among others have a 260 mn dollar (306 billion won) exposure .

Banking sources told ET that while the initial amount will be used to seek extension of SsangYong’s debt repayment the lenders have made it clear that the incoming investor in the company will have to clear the dues upfront if Mahindra cedes control.

Mahindra currently owns 74.65 percent of cash trapped Ssangyong. Samsung Securities and its global partner Rothschild have been brought on board to help find a suitor for SsangYong.

HAAH may not have enough money to become a major shareholder of SsangYong with only 23 billion won in annual sales, with SsangYong needing 500 billion won to normalize its operations.

HAAH Automotive Holdings , purchases various vehicle assemblies from Chery which, along with parts sourced in North America are assembled in an American factory where the final vehicles are produced. These products are sold under the brand name VANTAS in North America. Informed sources say the aim is to close the deal as soon as possible so that vehicle exports to North America can start , allowing SsangYong Motor to make an inroad into the U.S. market.

Mahindra’s board moved a special resolution at its AGM to reduce its shareholding in SsangYong to less than 50%, an indication of a new investor coming in rather than a complete sell out. The board last April rejected a Rs 3300 crore turnaround plan for SsangYong, pushing the Korean car maker into deep financial distress.





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