`Ssangyong`s Bankruptcy Protection Could End Sooner`

The Seoul Central District Court warned yesterday that the planned debt workout for Ssangyong Motor could be pulled if the carmaker’s problems worsen.

“If Ssangyong Motor’s debilitating problems are sustained and the carmaker’s going-concern value falls below liquidation level, we could cancel the workout procedure for the company even before Sept. 15, when the company is scheduled to suggest a workout plan,” the court said.

In an interview with The Dong-A Ilbo, the court commented on rumors that Ssangyong will soon enter court supervision. “The carmaker was asked to present its workout plan by Sept. 15. Therefore, it is impossible for the court to begin bankruptcy procedures,” it said.

“If Ssangyong fails to suggest a workout plan by the deadline or its going-concern value significantly falls below liquidation value, bankruptcy protection might be brought to an end.”

Going-concern value is the value of a company based on the assumption that it keeps operating.

An end to bankruptcy protection, however, will not necessarily mean an immediate beginning to the bankruptcy process.

“Ending Ssangyong’s bankruptcy protection means the court would draw back from the case and the carmaker should handle its own problems,” the court said. “If the company has little possibility of turnaround, however, the court will stop bankruptcy protection and decide to put the carmaker under bankruptcy procedures.”

The court, however, has rarely put a company under bankruptcy procedures before making a final decision on debt workout.

The court received documents on Ssangyong’s assets and corporate value from PricewaterhouseCoopers Korea May 6 before the carmaker’s union went on strike. At the time, the Ssangyong’s going-concern value (1.33 trillion won or 1.06 billion U.S. dollars) was estimated to exceed liquidation value by 389 billion won (311.9 million dollars).

Since the union went on strike May 22, however, conditions surrounding the carmaker have changed significantly.

bell@donga.com