General Motors South Korea’s proposed $2.2bn debt to equity swap could keep it in the country
General Motors has proposed to convert debts of around $2.2bn from its South Korean business to equity in a debt-to-equity swap.
The news comes as GM has announced it will shut down its Gunsan plant, located south west of Seoul, by May, as other plants in South Korea remain in jeopardy.
A debt-to-equity swap enables a borrower to turn loans into shares of stock or equity, and usually involves a financial institution holding the new shares which have been transformed from the debt. Such a transaction would allow General Motors to keep trading in South Korea.
GM is also hoping to gain financial support and tax benefits from the Seoul government.
This marks the latest in a series of decisions to place profitability and innovation ahead of sales and volume, which has seen GM shutting down businesses which have proved unprofitable in areas including Europe, Australia, South African and Russia.
In South Korea, GM Korea currently employs around 16,000 people and 17% of the business is owned by the state-run Korea Development Bank.
According to Reuters, a source has said GM asked Seoul to provide over $1bn worth of financial support, and several sources confirmed GM has asked for its South Korea plants to be designated as foreign investment zones, so that the company can benefit from tax breaks.
Barry Engle, head of General Motors international operations has been in talks with the South Korean parliament this week. He stated to press on Tuesday: “It is certainly our preference to stay and fix the business and continue to be an important part of the Korea economy. I’m encouraged by the discussion and I am optimistic that this is an outcome that together we can achieve.”
Engle is said to have promised parliament that GM will try to maintain its current output levels of around 500,000 units per year.
As of yet, no final decisions have been made, but it has also been reported that Engle said GM wants to produce two new car models in South Korea, indicating the manufacturer will do its utmost to remain in the country.
Timeline: India takes unicorn leap with six in five days
We chart an historic week in India’s tech industry, where in just five days, between 5-9 April 2021, the country achieved six new unicorns, bringing India’s total to 10 in 2021 to date, an immense unicorn leap from just seven in 2020 and six in 2019.
April 5: Meesho
India’s first social commerce unicorn, Meesho raised US$300m from SoftBank, Facebook and Shunwei Capital, giving the Bangalore-based startup a US$2.1bn valuation, a threefold jump from its previous funding round in 2019. Founded in 2015 by two IIT-Delhi graduates, Meesho connects producers and resellers, helping small businesses sell through social media. It has 45m customers and has enabled 13m entrepreneurs to start their online businesses with no investment.
April 6: CRED
Founded just over two years ago, Bangalore-based credit card repayment app CRED raised US$215m from Falcon Edge Capital and Coatue, nearly trebling its valuation to US$2.2bn from its January US$80m round. Allowing customers to pay off their credit card debt while earning CRED coins which they cash in for rewards, CRED has grown rapidly during COVID-19, doubling its customer base to nearly 6 million in a year.
April 7: API Holdings / Groww
The first epharmacy startup to gain unicorn status, PharmEasy (API Holdings), which has digitised 60,000 brick and mortar pharmacies and 400 doctors across India, raised US$350m in a round led by Prosus Ventures. Founded by four former Flipkart employees as a way of making investing simple, investment platform Groww became India’s second-youngest fintech unicorn, raising US$83m in Series D funding led by Tiger Global, quadrupling its previous round in September.
April 8: ShareChat
New Delhi-grown social media startup ShareChat, founded in 2016 by Mohalla Tech raised US$502m from Lightspeed Ventures, Tiger Global, Twitter and Snap taking its raised total over six rounds to US$766m and pushing its valuation to US$2.1bn. The funding will be used to grow its user base and short video platform Moj, which launched in 2020 following TikTok’s ban in India. The regional language startup claims 280m users.
April 9: Gupshup
AI-led conversational message startup joined the unicorn club after raising US$100m from Tiger Global giving it a ten-fold valuation of US$1.4bn. The smart messaging platform, which has seen accelerated growth during the pandemic, was founded in Bangalore in 2005 by serial entrepreneur Beerud Sheth, whose online freelancing platform Elance is now listed. Gupshup’s API enables 100,000+ businesses to build messaging and conversation experiences across 30+ communication channels.