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There are new variables in Evergrande Auto's process of provoking conflict.

On the evening of July 28, Evergrande Auto announced on the Hong Kong Stock Exchange that its subsidiaries Evergrande New Energy Vehicle and Evergrande Smart Vehicle received notices issued by relevant local courts. Individual creditors applied to the relevant local courts on July 25 for bankruptcy reorganization of the relevant Evergrande Auto subsidiaries.

Evergrande Auto said that the above notice has a significant impact on the production and operation activities of the company and its related subsidiaries.

It is worth mentioning that in May this year, a mysterious buyer was interested in buying 58.5% of Evergrande Auto’s shares jointly held by Evergrande Group and others, and Evergrande Auto is expected to obtain financial support.

However, as of July 26, Evergrande Auto updated its progress and stated that, as of now, discussions between the potential buyer and seller and the company are still ongoing, but the potential seller and the potential buyer have not yet entered into a sales agreement, and the potential buyer and the company have not yet entered into a credit agreement.

Evergrande Auto's subsidiary was filed for bankruptcy reorganization

Evergrande Auto continues to face negative news.

On the evening of July 28, Evergrande Auto announced that its subsidiaries Evergrande New Energy Vehicle (Guangdong) and Evergrande Smart Vehicle (Guangdong) received notices issued by the relevant local people's courts on July 26. The main contents of the announcement are as follows: Individual creditors of the relevant subsidiaries applied to the relevant local people's courts on July 25, 2024 for bankruptcy reorganization of the relevant subsidiaries.

Evergrande Auto analyzed that the above-mentioned notice will have a significant impact on the production and operation activities of the company and its related subsidiaries.

According to information, Evergrande New Energy Vehicle and Evergrande Smart Vehicle are both wholly-owned subsidiaries of Evergrande Auto, with registered capital of 5 billion yuan and 2.5 billion yuan respectively.

It is worth mentioning that this is not the first time that Evergrande Auto has encountered negative news.

On June 11 this year, Evergrande Auto received two relevant announcements from local government departments. One was that the local government required Evergrande Auto and its subsidiaries to return 1.9 billion yuan in rewards and subsidies that had been issued; the other was that the Tianjin factory, as Evergrande Auto’s main factory, was also planned to be ordered to suspend production, stop sales and rectify.

Evergrande Auto said that if the above decision is finally implemented, the Group will face the risk of the relevant factory land being forcibly reclaimed and the above-ground buildings and equipment being used to repay incentives and subsidies, which will have a significant impact on the financial status and operations of the company or its subsidiaries. At present, the relevant subsidiaries have planned to apply for administrative reconsideration to the relevant local municipal people's government.

Mysterious buyer acquisition deal still in progress

Amidst all the unfavorable news, Evergrande Auto still seems to hold on to a glimmer of hope.

On May 26 this year, Evergrande Auto announced that on May 16, the company had learned that the joint and individual liquidators, on behalf of China Evergrande Group (in liquidation), Evergrande Health Industry Group Co., Ltd., and Acelin Global Limited (collectively referred to as the potential sellers), had entered into a term sheet with an independent third-party buyer (potential buyer) known and believed by the company's directors after making all reasonable enquiries, pursuant to which the potential seller and the potential buyer may enter into a final sales and purchase agreement for the sale and purchase of the company's shares held by the potential seller.

Specifically, Evergrande Group and other potential sellers hold a total of 6.348 billion shares (approximately 58.5% of all issued shares) (Potential Sale Shares). Upon the signing of the sale and purchase agreement and subject to its terms and conditions, it is proposed that 3.145 billion shares (approximately 29% of all issued shares) will be acquired immediately, and 3.203 billion shares (approximately 29.5% of all issued shares) will become the subject of an option that the potential buyer can exercise within a certain period after the date of the sale and purchase agreement.

In addition to acquiring shares, Evergrande Auto is also expected to obtain financial support. Evergrande Auto said it has learned that the term sheet mentions the conclusion of a credit agreement, according to which the potential buyer will provide Evergrande Auto with a credit line to finance the group's continued operations and development of the group's electric vehicle business.

On July 26, Evergrande Auto released a monthly update announcement stating that as of now, discussions between the potential buyer and seller and the company are still ongoing, but the potential seller and the potential buyer have not yet entered into a sales agreement, and the potential buyer and the company have not yet entered into a credit agreement.

At the same time, Evergrande Auto emphasized that since the potential transaction is subject to further due diligence (including but not limited to the potential buyer's proof of funds and due diligence on the Group's assets, liabilities, business, financial and legal matters) and the signing of the sale and purchase agreement and the credit agreement, and is subject to the terms and conditions of such agreements, the potential transaction may or may not proceed, and the discussion of the potential transaction may or may not lead to a general offer under Rule 26.1 of the Takeover Code. Therefore, shareholders and potential investors are strongly advised to be extremely cautious when buying and selling shares.

Source: China Securities

Statement: All information content of Databao does not constitute investment advice. The stock market is risky and investment should be cautious.

Editor: He Yu

Proofreading: Yao Yuan

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