On Wednesday, September 4, one of Evergrande Auto’s subsidiaries – Evergrande Hengchi New Energy Auto (Shanghai) Co., Ltd., was petitioned for bankruptcy liquidation by the creditor Zhejiang Chint Electrics Co., Ltd. at the Third Intermediate People’s Court of Shanghai.
Industry insiders believe that this move will bring even greater pressure to Evergrande Auto, which is already deeply mired in difficulties. Evergrande Auto’s parent company, China Evergrande Group, was ordered to liquidate by the Hong Kong High Court on January 29 of this year.
According to a report from Reuters on Thursday, Chint Electrics is a creditor of Evergrande Hengchi and on September 4, submitted a petition for bankruptcy liquidation to the court due to overdue debt repayment.
The court stated that a hearing will be held on September 18 to decide whether to accept the application and initiate the bankruptcy proceedings.
On Thursday evening, Evergrande Auto stated in the documents submitted to the court that they had received relevant notices from the court, but it would not have a significant impact as their subsidiaries’ production and operations are currently at very low levels. They are considering defending against the creditors’ application.
Evergrande Auto stated, “The production and operation of the relevant subsidiaries are currently at very low levels. Therefore, this notice will not have a significant impact on the group’s production and operation.”
It has been reported that this is the third time one of Evergrande Auto’s subsidiaries has been petitioned for bankruptcy restructuring. In early August, the company announced to the Hong Kong Stock Exchange that Evergrande’s wholly-owned subsidiaries, Evergrande New Energy Auto and Evergrande Intelligent Auto, were being petitioned for bankruptcy restructuring. This kind of news has made Evergrande Auto’s financing efforts even more challenging.
On Thursday, around 20 minutes after the Hong Kong Stock Exchange opened at 9:30 a.m., Evergrande Auto suddenly announced a trading halt, with the stock price falling by 5.38% before the suspension.
On August 30, Evergrande Auto released its mid-year report for 2024, showing a net loss of 20.3 billion RMB (2.9 billion USD) in the first half of the year, which is an increase from the 6.9 billion RMB (973 million USD) net loss in the same period last year.
The company’s total liabilities as of June 30, 2024, increased by 2.5% to 74.4 billion RMB (10.5 billion USD) from the end of last year, while total assets dropped by 53% to 16.4 billion RMB (2.3 billion USD).
As of June 30, 2024, Evergrande Auto only had 39 million RMB (5.5 million USD) in cash and cash equivalents.
The company’s auditors stated that significant uncertainties in its financial performance could have a major impact on its ability to continue operating.
Facing debt and operational pressures, Evergrande Auto has been seeking to introduce strategic investors, sell related shares, and obtain financial support. However, as of now, there has been no substantial progress in these efforts.