Ssangyong Motor to write off 80 pct of Shanghai Auto's stake

(ATTN: ADDS details, quote, stock reaction in paras 3-6; EDITS throughout)
By Kim Deok-hyun
SEOUL, Sept. 15 (Yonhap) -- Ssangyong Motor Co., the embattled South Korean
carmaker, said Tuesday it has asked a bankruptcy court to cancel most shares
owned by its Chinese parent Shanghai Automotive Industry Corp. as part of its
turnaround plan.
Under the plan submitted to the court in Seoul earlier in the day, Ssangyong also
sought to convert 393 billion won (US$321.5 million) of its debts into new
shares, the company said in a statement.
If creditors and shareholders approve the plan, Shanghai Automotive's stake in
Ssangyong will be reduced to 11.2 percent from the current 51 percent. The
Ssangyong Motor shares owned by minority shareholders will be cut at a ratio of
three shares to one, according to the company's statement.
Ssangyong also proposed to repay its total debt of 1.23 trillion won over the
next 10 years, including the debt-to-equity swap plan.
Shares of Ssangyong Motor plunged 5.22 percent to trade at 2,905 won at one point
in early afternoon trading in Seoul.
"To secure necessary funds, we plan to sell assets early and borrow more money,"
said an official at Ssangyong.
Still, the future of the automaker remains uncertain as its main creditor, the
state-run Korea Development Bank (KDB), has refused to provide further support,
analysts say.
Ssangyong, South Korea's smallest carmaker, entered bankruptcy protection in
February after Shanghai Automotive abandoned the loss-making affiliate.
As part of restructuring efforts, Ssangyong had planned to cut 2,646 workers, or
36 percent of its workforce. About 1,700 employees left the company through
voluntary retirement packages, but the remaining workers occupied the carmaker's
only assembly plant for 77 days beginning in mid-May to protest the massive
job-cuts.
The occupation, marked by periodic violence, ended on Aug. 7 and further darkened
prospects for Ssangyong's survival, costing the company 316 billion won in lost
production.
Hit by the strike, Ssangyong's net loss widened to 177.1 billion won in the
April-June period. Sales for the same period plunged 66 percent to 221.7 billion
won.
Ssangyong is said to have total liabilities valued at 1.25 trillion won.
On Monday, an official at KDB reiterated that the bank will not provide new loans
for Ssangyong to develop a new model, deemed crucial for the carmaker's long-term
viability.
"There is no reason for creditor banks to offer funds for new-car development for
Ssangyong," the KDB official said.
Instead, Ssangyong should find private investors to raise fresh funds in the
process of bankruptcy protection, the official said.
The turnaround plan must be approved by creditors and shareholders. The court
will hold a meeting with creditors on Nov. 6, but the date of voting has not yet
been set, according to Ssangyong officials.
(END)