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(4th LD) Court approves turnaround plan by Ssangyong Motor

All Headlines 16:49 December 17, 2009

(ATTN: ADDS quotes in paras 13-15)

SEOUL, Dec. 17 (Yonhap) -- A South Korean bankruptcy court approved Thursday a turnaround plan by troubled Ssangyong Motor Co., giving the debt-ridden carmaker a chance to revive its struggling business, company officials said.

Ssangyong, the smallest carmaker in South Korea, has been under court-approved bankruptcy protection since February. Its woes deepened after hundreds of fired workers occupied the company's only plant for more than two months last summer, halting production.

The approval by the Seoul Central District Court came in spite of opposition by some bondholders who twice rejected the plan, saying it would undermine their interests. Most analysts, however, predicted that the court would give its approval, noting the carmaker's importance to the local economy.

Welcoming the court's decision, Ssangyong vowed to get itself in order over the next three years.

"We, employees at Ssangyong Motor, appreciate the court's approval and will make utmost efforts to put the company back on track," said Lee Yoo-il, one of two court-appointed managers at Ssangyong.

Lee said the loss-making company aims to return to the black by the end of 2012 by selling assets and repaying debts.

Shares of Ssangyong Motor surged nearly 14 percent following the court's approval, but the shares were suspended at 2:40 p.m. Trading will resume on Friday, the Korea Exchange said.

Under the turnaround plan, Ssangyong, majority owned by China's Shanghai Automotive Industry Corp., would cut the Chinese parent's holdings to 11.2 percent from 51 percent and repay some 1.23 trillion won (US$1.05 billion) in debt over the next 10 years.

The plan also calls for Ssangyong to write down its debts at a ratio of three to one.

But even with the court's approval, doubts persist over the company's viability.

In the first half of this year, Ssangyong's net losses reached 443 billion won. Sales also plunged 66 percent from a year ago to 455 billion won, with operating losses totaling 153 billion won.

Ssangyong's court-appointed managers said that they will choose a lead manager in January to sell the carmaker's stake to foreign investors.

"We plan to set a guideline to select a stake-sale lead manager as soon as possible and our target is to complete a deal by the end of 2010," Lee told reporters.

Several companies have shown interest in Ssangyong, but Lee declined to identify the potential buyers.

Park Young-tae, another court-appointed manager at Ssangyong, said the company may be able to launch a crossover utility vehicle, code-named C200, in the middle of next year if it secures 200 billion won in funding.

Ssangyong became the nation's first major corporate victim of the global economic crisis as the slump hit sales of new cars last year.

Some critics have accused Shanghai Automotive of failing to live up to its investment plan and of stealing technology from Ssangyong, which specializes in sport-utility vehicles.

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