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Our reporter Fang Chao and Shi Yingjing reported from Shanghai

"'Judicial pre-reorganization' is not 'bankruptcy reorganization', still less is it 'bankruptcy liquidation'." After many days of silence, HiPhi Auto made such a statement on August 9.

Just one day before HiPhi’s rare statement, a decision letter from HiPhi’s parent company Human Horizons (Jiangsu) Technology Co., Ltd. (hereinafter referred to as “Human Horizons Jiangsu Company”) to enter the pre-reorganization stage was circulated on the Internet. The decision letter stated: “The pre-reorganization period is six months from the date of this decision. If there are legitimate reasons, it can be extended for three months upon application by the pre-reorganization administrator.”

"We are handling the case here." On August 12, a relevant person from the People's Court of Yancheng Economic and Technological Development Zone, which issued the above-mentioned decision, also told a reporter from China Business News that "there is no more information at present" could be disclosed regarding the pre-reorganization case of Human Horizons Jiangsu Company.

Before entering the pre-judicial reorganization stage, HiPhi Auto had been shut down for nearly six months. The new car-making company has experienced many "self-rescues" such as live-streaming sales and receiving a $1 billion investment, but with little success. As for when normal operations will resume, HiPhi Auto's official customer service staff told reporters that the company's remaining staff are mainly responsible for customer service and after-sales work, and "please pay attention to the company's official announcement for subsequent developments."

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A court decision has brought HiPhi, which had previously experienced many turmoil, back into the industry's attention.

The National Enterprise Bankruptcy and Reorganization Case Information Network shows that on August 8, the People's Court of Yancheng Economic and Technological Development Zone publicly accepted the pre-reorganization decision of Human Horizons Jiangsu Company. The decision shows that Human Horizons Jiangsu Company applied to the court for reorganization of the company and applied for pre-reorganization at the same time on the grounds that its assets could not repay all due debts but had reorganization value and reorganization possibility.

"The applicant applies to this court for bankruptcy pre-reorganization on the grounds that the company cannot repay its matured debts and that reorganization will help it introduce funds, resume production, and protect the rights and interests of creditors." The above decision letter shows.

The People's Court of Yancheng Economic and Technological Development Zone also gave a detailed explanation on the acceptance of the preliminary reorganization of Human Horizons Jiangsu Company.

The People's Court of Yancheng Economic and Technological Development Zone believes that the business of Human Horizons Jiangsu Company involves the research and development and production of new energy vehicles, autonomous driving, cloud computing, etc. "The new energy vehicle industry has broad prospects. Pre-reorganization is conducive to improving the efficiency of corporate reorganization and reducing the cost of corporate reorganization. It can give full play to the function of the reorganization system to save distressed companies and better protect the legitimate rights and interests of creditors. In addition, the debtor has pre-reorganization value and meets the pre-reorganization conditions."

"'Pre-reorganization' is a preliminary procedure in which an enterprise negotiates with creditors and other stakeholders to reach a draft reorganization plan before officially entering the bankruptcy reorganization procedure. The main difference between it and 'reorganization' lies in the different stages. Pre-reorganization is the preparatory stage of reorganization and has not yet officially entered the legal procedure; while reorganization is a formal legal procedure under the framework of bankruptcy law and has legal effect." Chen Tiejiao, an expert at Kant Think Tank and a lawyer at Shanghai Guangming Law Firm, analyzed to reporters.

Pang Shanshan, senior co-partner of Beijing DHH Law Firm, also told reporters: "When entering the pre-reorganization stage, the interim administrator of the debtor company will organize a creditor meeting to find out the company's claims and debts, formulate a pre-reorganization draft, and submit it to all creditors for a vote."

The reporter noticed that public information showed that on August 8, the People's Court of Yancheng Economic and Technological Development Zone decided to accept the pre-reorganization application of Human Horizons Jiangsu Company and appointed Jun He Law Firm's Shanghai Branch as the company's interim administrator.

On August 10, the interim administrator of Human Horizons Jiangsu Company issued the "Announcement on Recruiting Investors of Common Benefit Bonds for the Pre-reorganization Case of Human Horizons (Jiangsu) Technology Co., Ltd." (hereinafter referred to as the "Recruitment Announcement"). The Recruitment Announcement shows that Human Horizons Jiangsu Company intends to borrow no more than RMB 300 million from common benefit investors, with the first installment being RMB 100 million.

"The funds provided by the common benefit bond investors will be used specifically for Human Horizons Jiangsu Company to ensure after-sales service for vehicles already sold and to resume work, production and sales. The final use will be subject to the Common Benefit Bond Loan Agreement signed by all parties," the recruitment announcement showed.

"The main reason why Human Horizons recruits common benefit bond investors is to ease the company's financial pressure and provide necessary financial support for pre-reorganization. Common benefit bond loans can be used for the company's daily operations, debt repayment, asset restructuring, etc., which will help promote the smooth progress of pre-reorganization." Chen Tiejiao told reporters.

Chen Tiejiao also told reporters that the common benefit bond borrowing will have a positive impact on HiPhi Auto's pre-reorganization, "such as increasing the possibility of successful corporate reorganization and improving creditors' confidence." Pang Shanshan also analyzed to reporters: "With the participation of common benefit bond investors, the pre-reorganization will have start-up funds, which will be more conducive to the success of the pre-reorganization."

"However, recruiting investors for common benefit bonds also involves certain risks and challenges, such as funding costs and repayment pressure, which require companies to carefully consider and respond to," Chen Tiejiao told reporters. As for whether the recruitment of investors for common benefit bonds in the pre-reorganization case has made progress, the interim administrator of Human Horizons Jiangsu Company replied to reporters, "Not yet."

Multiple rounds of "self-rescue" have little effect

Before entering the judicial pre-reorganization stage, HiPhi Auto had gone through multiple rounds of "self-rescue".

Public information shows that HiPhi, which is positioned as a "luxury smart pure electric brand", is affiliated to Human Horizons and was established in 2017. Ding Lei, the founder and CEO of Human Horizons HiPhi, has worked in traditional car companies and local governments.

HiPhi, which was born in the era of the "turbulent" new car-making forces, has not achieved ideal sales performance due to multiple factors such as positioning and price. For example, in terms of price, the price range of HiPhi X, HiPhi's first mass-produced car, is between 570,000 and 800,000 yuan, far exceeding the price of new car-making forces models of the same period. Public information shows that HiPhi's sales in 2021 and 2022 were only 4,237 and 4,349 respectively.

Since 2023, "price wars" in the automotive industry have been one after another, and market competition has become increasingly fierce. HiPhi Auto, which has sluggish sales, was also "exposed" to layoffs in October 2023. Public information shows that as early as October 2023, HiPhi Auto started large-scale layoffs in Shanghai, Qingdao, Yancheng and other places.

After entering 2024, HiPhi Auto still failed to reverse its "downward trend". On the first working day after the Spring Festival of the Year of the Dragon, HiPhi Auto was exposed to suspend production for 6 months. According to media reports, HiPhi Auto said at the time that the wages of employees before February 18 would be paid as usual; employees who remained at HiPhi Auto before March 15 would only receive basic wages; and employees after March 15 would only receive Shanghai basic wages.

"The next three months will be very difficult for HiPhi. These past few months have been a low point for me. I have not been able to get out of a misunderstanding. I used the organizational methods of traditional companies to deal with this crisis." On February 22, Ding Lei said this when he appeared at the Shanghai headquarters of Human Horizons.

After officially "acknowledging" the crisis, HiPhi Auto also launched multiple rounds of "self-rescue" actions.

On March 8 this year, HiPhi launched its first live broadcast to sell goods. Yang Yueqing, HiPhi Engineering Project Director, explained food in HiPhi. The reporter noticed that the products sold by HiPhi included steak gift boxes and tea, but the Douyin account of "HiPhi Official Live Broadcast Room" showed that its live broadcast activity "stopped" on April 29.

In addition to live streaming, in May this year, many media reported that HiPhi Auto received a $1 billion investment. At that time, the media reported that HiPhi Auto's parent company Human Horizons signed a comprehensive strategic cooperation agreement with the automotive investment consulting platform iAuto. iAuto plans to invest $1 billion in Human Horizons, and the scope of cooperation between the two parties includes but is not limited to production coordination to complete sales orders, equity mergers and acquisitions, etc. However, HiPhi Auto later responded that the specific information of the cooperation between the two parties is subject to the official announcement, and no more information can be disclosed at this stage.

Not only that, HiPhi Auto's parent company, Human Horizons Jiangsu Company, has become the subject of execution many times. Qichacha shows that the company currently has 5 pieces of information on subjects of execution, with a total amount of execution of 2.7893 million yuan. Human Horizons Holdings (Shanghai) Co., Ltd., which holds 80% of the shares of Human Horizons Jiangsu Company, also currently has 4 pieces of information on subjects of execution, with an amount of execution of 992,600 yuan.

Faced with multiple difficulties, HiPhi Auto seems to have high expectations for entering into judicial pre-reorganization.

"Judicial pre-reorganization is the first step. After an agreement is reached on judicial pre-reorganization, we will conduct judicial reorganization. In this way, the agreement between us and our creditors can be locked in, and the company will be officially on the right track." On August 9, HiPhi Auto also made a public announcement, "With the support of the government, the understanding of car owners, the company of our partners, and the help of all stakeholders and potential investors, all HiPhi employees who have stayed together will definitely fight to the end and work hard to resume work and production."

However, several former HiPhi employees told reporters that they have not received their salaries for their work at HiPhi. Regarding the progress of their salary arrears, one HiPhi employee said bluntly: "Even if we enforce the law, we won't get the money. Don't expect it anymore."

(Editor: Shi Yingjing Reviewer: Tong Haihua Proofreader: Yan Jingning)