The fate of SsangYong Motor, the cash-strapped Korean affiliate of Indian carmaker Mahindra & Mahindra, hung in the balance Thursday, as it failed to secure a letter of intent from its likely investor, US-based HAAH Automotive.

With the “prepackaged plan” scenario practically eliminated, the SUV-focused automaker now faces the worst risk of market delisting and liquidation. Financial authorities, however, maintained a prudent stance over the issue, leaving room for a last-minute turnaround.

“We have not yet received an investment letter of intent from HAAH Automotive,” said Eun Sung-soo, chairman of the Financial Services Commission.

“(The FSC) is ready for a variety of scenarios and will make the necessary measures, depending on the progress of the issue.”

With this remark, the chief financier was seen as alluding to the plausibility of a deal breakoff.

Regarding the court receivership possibility of the carmaker, another senior official of the FSC speaking on condition of anonymity said that “nothing has been decided yet,” taking a cautious approach on the issue. The official added that “something seems to be setting back” the actions from HAAH Automotive, in an apparent gesture to allow some additional time for the ailing carmaker.

The Seoul Bankruptcy Court earlier ordered the cash-strapped auto company to submit a letter of investment intent by HAAH Automotive by March 31 at the latest.

Taking into account the time difference between South Korea and the US, SsangYong Motor was hoping to submit HAAH’s letter by early Thursday morning. The carmaker had earlier submitted its own statement to the court in time, excluding the investor letter.

The letter of intent was the missing piece of the puzzle for SsangYong’s prepackaged plan -- a system that allows the debtor to come up with a voluntary rehabilitation plan before going into court receivership.

But even if the carmaker manages to secure the letter of intent from HAAH, it still remains uncertain whether the court will approve of the suggested rehabilitation plan due to the company’s snowballing debts totaling 370 billion won ($327 million) and its current struggles to deal with suppliers.

Last year the automaker logged 449.4 billion won in operating losses, while its sales dropped 18.6 percent on-year to 2.9 trillion won. Its liability rate came to 111.8 percent as of the end of the year.

Last month, SsangYong’s management and labor union reached an agreement to cut employees’ wages for March and April by half, extending the pay cut over the past two months as a last resort in the face of court receivership.

Amid the delay or hesitation of investment, some market observers claimed that HAAH may be considering acquiring the Korean carmaker after it goes through court receivership and lowers the current level of liabilities.

If denied of investment or court-backed rehabilitation, the worst-case scenario for SsangYong Motor is delisting from the stock market and the consequent liquidation process. The ailing company has recently received a disclaimer of opinion from an outside auditor over its 2020 financial statements, a preliminary procedure to the Korea Exchange’s delisting review.

By Bae Hyun-jung (tellme@heraldcorp.com)