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China Evergrande's EV arm units to enter bankruptcy proceedings
EV group's shares plunge 7.9% on intermediate court's reorganisation ruling
A view of the electric vehicle factory of China Evergrande New Energy Vehicle Group in Tianjin, China. — Reuters File
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 per cent, 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 reorganisation could impact ongoing talks between liquidators of parent China Evergrande 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 reorganisation will be held on October 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 August 2.
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 even per cent 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) reorganisation, 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 per cent in the EV unit — said they were talking to a third-party buyer to sell a 29 per cent 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.
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