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A Seoul court has approved SsangYong Motor's rehabilitation plan with 'overwhelming' support from creditors and other related parties, paving the way for the carmaker to get its business back on track.

In 2011, Mahindra acquired a 70 per cent stake in SsangYong for 523 billion won and now holds a 74.65 per cent stake in the carmaker.

The approval, which came one month after SsangYong submitted its restructuring plan to the Seoul Bankruptcy Court, effectively green lights a local consortium's bid to buy the debt-laden carmaker.

In June, the court picked the consortium, led by chemical-to-steel firm KG Group, as the final bidder to acquire SsangYong, reports Yonhap news agency.

SsangYong's creditor banks, subcontractors and shareholders have agreed on the carmaker's proposed debt settlement plan in a meeting presided over by the court, the company said in a statement.

SsangYong expected it will be able to graduate from the court-led debt rescheduling program within this year if all the planned debt payments are completed as scheduled.

Under the plan, SsangYong said it will pay 237 billion won ($177 million) to its creditors, 13.97 percent of 393.8 billion won it owes to subcontractors in cash and 5.43 percent of 136.3 billion won to its Indian parent Mahindra & Mahindra Ltd in cash.

SsangYong plans to convert the remaining debt it owes to subcontractors and Mahindra into SsangYong shares in a debt-to-equity swap.

In the case of Mahindra, it will undergo two rounds of reverse stock splits -- 1-for-10 and 1-for-3.6 -- after completing the debt-to-equity swap. It will sharply lower Mahindra's stake in SsangYong to a single-digit number.

The KG consortium is set to emerge as the biggest shareholder with a 61 percent stake in the SUV-focused carmaker.

The KG consortium offered the price of 335.5 billion won for SsangYong, which has been under court receivership since April 15, 2021, after Mahindra failed to attract an investor amid the Covid-19 pandemic and its worsening financial status.