The three companies of Evergrande have resumed trading, Evergrande's automobile war has changed, and the industry: "guaranteeing the handover building" is not solved, and Evergrande's bankruptcy is unrealistic
Reporter Li Beibei reported from Shanghai
Following China Evergrande (03333. HK), Evergrande Property (06666. HK) resumed trading on October 3, and on October 9, Evergrande Auto (00708. HK) resumed trading. As of the close of the day, the stock price fell 8.93% to HK$0.51 per share, with a market value of HK$5.530 billion.
It is worth noting that the day before, the inside information announcement disclosed by Evergrande Auto showed that the original planned 500 million US dollar strategic investment of Newton Group (NWTN) has changed, and the original planned 600 million yuan capital injection has also been suspended. Evergrande Auto said it had sent a letter to Newton Group to renegotiate the deal.
The change in Newton Group's proposed shareholding is directly related to many negative news about Evergrande Group recently. Since the end of September, the actual controller, Xu Jiayin, and a core member have been taken away for investigation, adding further variables to the restructuring of overseas debts that has been blocked due to the loss of qualifications for issuing new notes. Since the overseas debt restructuring plan involves the shares of Evergrande Automobile, this battle has attracted considerable attention from the industry. However, how Evergrande's overseas debt restructuring plan and the transaction plan with Newton Group will be adjusted have not been explained by Evergrande Auto and China Evergrande at present.
Bai Wenxi, chief economist of IPG China, said bluntly that the outlook for Evergrande Group is not optimistic: "At present, all parties may need more time and effort to find a solution, including renegotiating the terms of debt restructuring, seeking new investors, selling assets, etc." But if the current predicament cannot be effectively resolved, the possibility of Evergrande's bankruptcy will increase. ”
Evergrande auto war is reborn
Evergrande Auto released the "Inside Information and Resumption of Trading" announcement on the evening of October 8, showing that Newton Group's investment in Evergrande Auto was variable.
According to the announcement, on September 29, Evergrande Auto received a letter from the subscriber Newton Group, which said that in view of Evergrande Auto's announcement on September 28 of its share suspension trading, together with a series of recent changes in China Evergrande Group, there are significant uncertainties, which in turn will bring significant uncertainty to the share subscription agreement and the proposed transaction. According to the share subscription agreement, the completion of the debt restructuring of Evergrande Group and a series of other preconditions are important preconditions precedent to closing. In such circumstances, Newton Group suspended its obligations under the Share Subscription Agreement.
According to public information, on August 14 this year, Evergrande Auto announced that it received the first strategic investment of 500 million US dollars from Newton Group, a listed company held by the UAE National Sovereign Fund. Upon completion of the transaction, Newton Group's shareholding in Evergrande Auto will account for 27.5% of the total number of outstanding common shares after the expansion.
At the same time, in order to support the business recovery and growth of Evergrande Automobile, Newton (Zhejiang) Automobile Co., Ltd., a subsidiary of Newton Group, signed a transitional financial support agreement with Evergrande New Energy Automobile (Tianjin) Co., Ltd. Subject to satisfying the conditions set out in the agreement, Newton shall provide Evergrande Automobile with an equal amount of interest-free and secured transitional funds totaling RMB 600 million in three tranches for the research and development, production and sales of Evergrande Automobile.
In the above-mentioned letter, Newton Group pointed out that according to the transitional period financial support agreement, due to the current situation that the preconditions under the share subscription agreement could not be met, the preconditions for Newton (Zhejiang) Automobile Co., Ltd. to pay the second and third tranches of funds to Evergrande New Energy Automobile (Tianjin) Co., Ltd. could not be met, so it was temporarily not obliged to pay these two funds, that is, the capital injection of RMB 400 million was suspended.
In the letter, Newton Group hopes that Evergrande Auto will reply to clarify that the debt restructuring plan of Evergrande Group involved in the share subscription agreement needs to be readjusted, and there are plans to launch a new restructuring plan; and the willingness of China Evergrande Group, Evergrande Automobile, creditors and related parties to renegotiate the adjustments required for the proposed transaction plan on the premise that the new restructuring plan is clear. However, up to now, China Evergrande and Evergrande Automobile have not responded accordingly.
Newton Group's war investment once made Evergrande Auto full of confidence. According to the half-year report, as of June 30, 2023, Evergrande Automobile's accumulated losses and current net liabilities were 105.771 billion yuan and 36.605 billion yuan, respectively, while cash and cash equivalents and restricted cash were only 117 million yuan in the same period. "The Group will need substantial funding in the foreseeable future to fund these financial obligations and capital expenditures under various contractual and other arrangements." Evergrande Auto pointed out.
There is no doubt that if Newton Group's war pitch fails, the prospects of Evergrande Auto will be extremely unoptimistic. However, Evergrande Auto said that Newton Group confirmed that the letter issued to Evergrande Auto did not constitute a notice of termination of the share subscription agreement, and there was no request to terminate the share subscription agreement as of the date of the letter; It also sent a reply letter to Newton Group on October 5, indicating its willingness to renegotiate with it on the adjustments required for the proposed transaction.
"The outlook is really not optimistic"
The change in Newton Group's proposed shareholding is directly related to many negative news about Evergrande Group recently. As Newton said, "China Evergrande Group has undergone a series of changes recently." Since the end of September, news that the restructuring of overseas debts has been blocked, and the actual controller Xu Jiayin and other core members have been taken away for investigation, which has made the mired Evergrande Group even worse.
China Evergrande announced on the evening of September 28 that Xu Jiayin, executive director and chairman of the board of directors of the company, has been taken compulsory measures in accordance with the law due to suspected violations and crimes. Up to now, there is still no authoritative information about the progress of the Xu Jiayin incident.
In addition to the compulsory measures taken by Xu Jiayin, the actual controller, comprehensive information shows that the core members of Evergrande who have been taken away recently include Xu Tenghe (Peter Xu), the second son of Xu Jiayin, who once led Evergrande's wealth work, Pan Darong, former CFO of Evergrande, who is mainly responsible for the operation of Evergrande's funds, and Yong Litao, former chairman of Evergrande Real Estate Group and Evergrande Property Group. In addition, former chairman of the real estate group, Ke Peng, legal representative and executive director Du Liang of Evergrande Wealth are also currently under investigation.
Hui Jiayin and other core members were taken away for investigation, adding to the uncertainties to the restructuring of overseas debt, which had already been blocked.
On March 22 this year, China Evergrande announced its overseas debt restructuring plan, involving a capital scale of about US$19.149 billion. The core agreement in the plan is for Evergrande to realize debt restructuring by issuing compulsory exchangeable bonds and notes, and replace "old debt" with "new debt". Later, Evergrande said that "most of the debtors have supported the aforementioned restructuring plan".
However, after the restructuring plan was announced, the formal creditors' meeting was repeatedly postponed. On September 22, the meeting was canceled by China Evergrande, citing poor sales performance. Subsequently, on September 24, China Evergrande announced that "given that Evergrande Real Estate is under investigation, the current situation of the group cannot meet the qualifications for the issuance of new notes." Unable to meet the eligibility for the issuance of new notes, and "it is necessary to re-examine the terms of the proposed restructuring to match its objective circumstances and creditors' demands", it is uncertain when China Evergrande's offshore debt restructuring will be implemented.
On September 28, China Evergrande disclosed that as of the end of August 2023, the company involved in the cumulative amount of unpaid mature debts of about RMB 278.532 billion, and overdue commercial bills of about RMB 206.777 billion. According to Wind data, Evergrande Real Estate Group still has 13 RMB bonds, involving 51.363 billion yuan, and 2 US dollar bonds, involving an amount of about 18.648 billion yuan.
Bai Wenxi, chief economist of IPG China, pointed out to the China Times reporter that whether Evergrande will eventually go bankrupt, whether it will enter bankruptcy liquidation is not only a business operation and legal issue, but also needs to consider social issues such as "guaranteeing the handover of buildings". It is unrealistic for Evergrande to formally announce its bankruptcy proceedings before there is a practical solution to the problem of "guaranteed handover of buildings", but its prospects are indeed not optimistic. It may take more time and effort to find a solution, including renegotiating the terms of debt restructuring, seeking new investors, and selling assets. But if the current predicament cannot be effectively resolved, the possibility of Evergrande's bankruptcy will increase.
According to media reports, on September 25, the Evergrande Group was still holding weekly meetings normally. The above-mentioned regular meeting was held by video link, with the participation of various projects of Evergrande, and the organizer of the meeting was Shaun, CEO of Evergrande. At the meeting, Sean mainly mentioned the sales of Baojiao Building and National Day Golden Week.
On October 4, "Evergrande Real Estate in Shenzhen" announced that as the real estate industry enters a new stage, "guaranteeing the delivery of buildings" has become the most important work of major real estate enterprises. Up to now, Evergrande Group Shenzhen Company has delivered more than 6,000 sets from January to August this year, showing more positive trends in delivery, sales and other aspects, and the project's "guaranteed handover building" work has also been affirmed and supported by owners, construction units and other parties.
Responsible editor: Zhang Bei Editor-in-chief: Zhang Yuning