HAAH Automotive Holdings Inc., a US based import car distributor, is understood to invest close to $258 million in Ssangyong Motor Co. for a substantial stake in the South Korean automaker. HAAH is supposed to have submitted the proposal late last week, said the a person in the know.

Mahindra currently holds a 74.65 percent in the cashtrapped Ssangyong .

HAAH Automotive is understood to have laid down some stringent conditions for its investment, such as the delay of Ssangyong’s debt repayment to its creditors ,say sources.

As of the first half of this year, the total short-term debt SsangYong needs to repay is 306 billion won. Of this, JPMorgan, BNP Paribas, Bank of America Merrill Lynch and other foreign investment banks owed 150 billion won.

The investors were demanding Mahindra maintain at least a 51 percent shareholding in SsangYong for a loan rollover or extension.

Foreign banks servicing SsangYong’s loans have informed that if Mahindra cedes a controlling stake, it would jeopardise refinancing of its loans with the buyer having to clear all outstanding dues before taking control. As of end March, SsangYong has USD 322.4 million short-term loans, to be repaid before a year with 167 billion won from JP Morgan, BNP Paribas and Bank of America.

Sources close to the development told ET that HAAH may not have enough money to become a major shareholder of SsangYong with only 23 billion won in annual sales, with SsangYong needing 500 billion won to normalize its operations. .

Mahindra’s board moved a special resolution at its AGM to reduce its shareholding in SsangYong to less than 50%, an indication of a new investor coming in rather than a complete sell out. The board last April rejected a Rs 3300 crore turnaround plan for SsangYong, pushing the Korean car maker into deep financial insecurities.

HAAH Automotive Holdings, will be purchasing various vehicle assemblies from Chery which, along with parts sourced in North America will be assembled in an American factory where the final vehicles will be produced. These products will be sold under the brand name VANTAS in North America, the Haah spokesperson said

Recently, SsangYong's external auditor refused to sign its financial statement, citing discrepancies and its “doubtful existence” even as the automaker posted a 98.6 billion won ($82.3 million) operating loss in the first quarter of 2020, and is likely to sink deeper into the red in the second quarter.