JP Morgan has sought repayment of loan worth 40 billion Korean wons from Mahindra & Mahindra's troubled foreign arm SsangYong Motor Company (SYMC) but the South Korean auto maker has expressed its inability to pay the amount now.
Following the Korean automaker's application for rehabilitation dated December 21, JP Morgan issued a notice to the cash-strapped firm demanding the repayment of an outstanding loan amount of 40 billion KRW (around Rs 268 crore with interest), M&M said in a regulatory filing.
"SYMC has today intimated to the Korean Stock Exchange that it could not repay the loan amount of 40 billion KRW to JP Morgan on account of its application for rehabilitation," it added.
The Korean automaker has outstanding loans aggregating to 100 billion Korean Won (around Rs 680 crore) from Seoul-based branches of JP Morgan Chase Bank, BNP Paribas and Bank of America.
Last week, M&M had informed the bourses that SYMC has missed repayments of loans aggregating to 60 billion KRW (around Rs 408 crore). On December 21, SYMC filed an application for commencement of rehabilitation procedure with the Seoul Bankruptcy Court under the Debtor Rehabilitation and Bankruptcy Act of South Korea.
The troubled automaker has also applied for an autonomous restructuring support (ARS) programme which is a court-designed process. M&M, which owns around 75 percent in SsangYong, has already committed to cover the above mentioned loans given by the banks and has clearly stated that its final liability will be limited to the extent of amount not recovered from SYMC.
Elaborating specifically on the JP Morgan dues, the company said in the filing: "Upon payment of the dues by the company (M&M) to the bank, the company will be subrogated to all the rights of the bank against SYMC and the company will step into the shoes of the bank as creditor and will be entitled to all rights which the bank had against SYMC, with respect to this loan."
The Mumbai-based auto major had acquired the loss-making SsangYong in 2010 but failed to turn it around since then despite several attempts. M&M holds nearly 75 percent in the Korean company now and has since invested over $110 million.
SsangYong has been struggling with deteriorating earnings since 2017 when it slipped into the red with a net loss of 66 billion wons as against a net profit of 58 billion wons in 2016. In 2018, its net loss rose to 62 billion wons and then ballooned to 341 billion wons in 2019.
(Edited by : Jomy)