China Evergrande’s EV arm units to enter bankruptcy proceedings, court rules
By Clare Jim and Rishav Chatterjee
(Reuters) -China Evergrande ‘s electric vehicle group said on Monday a Chinese court had ruled that two of its subsidiaries should enter bankruptcy and be reorganised, sending the EV group’s shares plunging 7.9%, the lowest since May 16.
The news about the subsidiaries of the embattled real estate developer’s New Energy Vehicle operation came after creditors filed for the proceedings last month. Their filings did not spell out reasons.
Any such bankruptcy and reorganization could impact ongoing talks between liquidators of parent China Evergrande (HK:) Group, the world’s most indebted property developer, and a potential buyer interested in taking a stake in the EV company, market watchers told Reuters.
A separate filing at the National Enterprise Bankruptcy Information Disclosure Platform showed a creditor meeting about the reorganization will be held on Oct. 22 at the Guangzhou Intermediate People’s Court.
The electric vehicle maker said the court had ordered the units – Evergrande New Energy Vehicle (Guangdong) and Evergrande Smart Automotive (Guangdong) – to enter into the proceedings after a hearing on Aug. 2.
It did not go into further detail.
It said on July 28 that creditors of the two units had sought court approval for the bankruptcy and reorganisations, and warned that the move would have “a material impact” on its production and operating activities. Shares in the group sank 7% on July 29.
The Guangzhou Intermediate People’s Court said in its own filing it had appointed law firm Zhong Lun (Shenzhen) as the administrator for the Evergrande Smart Automotive (Guangdong) reorganization, and the creditors who filed the application were Guangdong Overseas Construction Consulting Co and Guangzhou Shenlong Road Transport Co.
In May, liquidators of the parent company – which held 58.5% in the EV unit – said they were talking to a third-party buyer to sell a 29% stake in the EV group, with an option to sell the rest of the holding within a certain period of time.
A definite agreement has yet to be signed. The Evergrande parent company said in late July that under initial terms, the buyer would also provide a credit line to the EV company to finance its operation.
