Introducing war rebirth? After Xu Jiayin was arrested, the "local tyrants in the Middle East" braked halfway
Image source: @VisualChina
Evergrande Automobile, which is extremely short of money, may hang its life by a thread.
After six trading days of temporary suspension, at 14 o'clock on October 9, Evergrande Auto finally resumed trading. As of the close of the day, it was 0.51 yuan, down nearly 9%. After the boots of "Xu Jiayin was taken compulsory measures" landed, the other two listed companies of the "Evergrande family", "China Evergrande" and "Evergrande Property", have completed the transaction for four days.
Fatally, the "Middle East gold lord", which was once regarded as the lifesaver of Evergrande's automobile, also braked halfway. In the announcement of the resumption of trading, Evergrande Auto revealed that the original planned 500 million US dollar strategic investment of Newton Group (NWTN) has changed. It said it had sent a letter to Newton Group intending to renegotiate the deal. In addition, Newton Group's original plan to provide 600 million yuan of transitional funds to Evergrande Auto has also been suspended.
On September 28, China Evergrande, Evergrande Property and Evergrande Automobile, three listed companies under the "Evergrande Series", collectively suspended trading. This is only a month since China Evergrande last resumed trading. During this period, Evergrande was in a constant situation, losing its qualification to issue new notes, debt restructuring was blocked, and Xu Jiayin, executive director and chairman of the board of directors, was suspected of violating laws and crimes and has been taken compulsory measures in accordance with the law.
The final situation of Xu Jiayin, the "real estate hero", has been decided, and there is still a debt quagmire that is difficult to end. Evergrande Automobile, seen as Xu's chip, has struggled to survive for the past two years, trying to shake off the drag of parent company Evergrande Group. The overseas debt restructuring plan previously proposed by Evergrande Group also involves the sale or pledge of Evergrande Automobile's shares.
In the latest announcement, Evergrande Auto did not explain whether Evergrande Group will readjust the restructuring plan or launch a new restructuring plan after the overseas debt restructuring changes. This is one of the issues that Evergrande's stakeholders, especially external investors, are most concerned about.
01
Evergrande Automobile
Resumption of trading, Newton Group suspended capital injection
After six trading days of temporary suspension, on the evening of October 8, Evergrande Auto (00708.HK) announced that it would resume trading on October 9.
Compared with the market situation of the stock slightly rising after the "resumption of trading", the war investment news released at the same time attracted more people's attention. In an announcement issued by Evergrande Automobile on October 8, it said that the company's investment in Newton Group, announced on August 14, "may not be carried out." Evergrande Auto has sent a letter to Newton Group indicating its willingness to renegotiate the deal.
Recalling the deal, on August 14, Evergrande Automobile announced that Newton Group invested US$500 million in it to acquire a 27.5% stake in Evergrande Automobile, becoming one of its major shareholders. At that time, Evergrande Auto introduced the background of Newton Group as "Middle East capital". Hours before the official trading announcement, Evergrande Auto's share price rose sharply, closing up 14% on August 14.
According to the latest announcement, after a number of changes in the parent company Evergrande Group, Evergrande Auto received a letter from the subscriber Newton Group on September 29. The letter stated that Newton Group suspended its obligations under the share subscription agreement.
According to the previous announcement, Newton Group had drawn up as many as 18 preconditions for its stake in Evergrande Automobile. Among them, Article 15 requires the debt restructuring of Evergrande Group to take effect, while Item 13 states that "as of the delivery date, there are no significant adverse events in existence".
In the latest announcement, Newton Group said that according to the transitional period fund support agreement, due to the current situation that the preconditions under the share subscription agreement cannot be met, Newton (Zhejiang) Automobile's preconditions for paying the second and third tranches of funds to Evergrande New Energy Vehicle (Tianjin) have not been met, and there is no obligation to pay the second and third tranches of funds to Evergrande New Energy Vehicle (Tianjin) for the time being.
Newton Group also hopes that Evergrande Auto will give a clear response to its concerns, including the need to readjust the debt restructuring plan of Evergrande Group involved in the share subscription agreement, and plans to launch a new restructuring plan; and the willingness of China Evergrande Group, the Company, creditors and related parties to renegotiate the adjustments required for the proposed transaction plan on the premise that the new restructuring plan is clear.
It is worth noting that this letter is not a "severance of diplomatic relations" notice. Evergrande Auto stressed that as of the date of the letter (September 29), the subscriber had not requested the termination of the share subscription agreement. In addition, Evergrande Automobile also sent a reply letter to the subscriber on October 5, indicating that it was willing to renegotiate with the subscriber for the adjustments required for the proposed transaction plan.
In addition to the share subscription, Newton Group's original plan to provide 600 million yuan of transitional funds to Evergrande Auto has also been suspended. Evergrande Automobile originally planned to use the transition fund for automobile research and development, production and sales business. It is understood that this amount has only paid 200 million yuan so far.
In the three years of 2020~2022, the net loss of Evergrande Auto exceeded 90 billion yuan. In the first half of this year, Evergrande Automobile's revenue was 154 million yuan, a year-on-year increase of 540.98%, and the increase in revenue was mainly due to the start of sales of Hengchi 5. However, the gross profit lost 60.88 million yuan in the first half of the year, a year-on-year increase of 532%, mainly due to the higher prices of core components such as batteries and chips, and the lack of large-scale production made manufacturing costs higher.
After the news of "holding hands" Evergrande Auto was announced, Newton Group, as the subscriber, its identity as "Middle East capital" was questioned. Founder Wu Nan's Chinese identity and mysterious background, as well as his relationship with Xu Jiayin's "circle of friends", made the deal seem confusing from the time it was announced. Now, superimposed on a series of changes and impacts of Evergrande, the prospects of cooperation between Newton Group and Evergrande Auto may change.
02 The situation continues, and the restructuring of foreign debt is blocked
The change in Newton Group's proposed shareholding is directly related to the recent series of incidents such as "Xu Jiayin, chairman of the board of directors of China Evergrande, was taken compulsory measures" and "Evergrande Real Estate was placed under investigation by the China Securities Regulatory Commission".
In late September, news of Xu Jiayin's "residential surveillance" was circulating. On September 28, China Evergrande announced on the Hong Kong Stock Exchange that the company had received notice from relevant departments that Mr. Xu Jiayin, executive director and chairman of the board of directors of the company, had been taken compulsory measures in accordance with the law due to suspected violations and crimes. In the morning of the same day, the shares of the three listed companies under the "Evergrande Series", China Evergrande, Evergrande Property and Evergrande Automobile, collectively suspended trading.
Earlier, on September 24, China Evergrande announced that the company could not meet the qualifications for new note issuance in view of the fact that Evergrande Real Estate was under investigation. This means that China Evergrande's overseas debt restructuring plan may face major adjustments. According to the overseas debt restructuring plan disclosed by China Evergrande at the end of March, the company plans to issue new bonds with a maturity of 4 to 12 years to replace the original bonds, involving a capital scale of more than US$19 billion.
It is understood that the "case investigation" mentioned by China Evergrande was exposed on August 16. According to the announcement of Evergrande Real Estate, due to Evergrande Real Estate's suspected information disclosure violations and violations, the CSRC decided to file a case against the company, and Evergrande Real Estate received the "Notice of Case Registration" issued by the CSRC on the same day. In response, Evergrande Real Estate responded that it "will actively cooperate with the investigation work of the China Securities Regulatory Commission and fulfill its information disclosure obligations in strict accordance with relevant requirements." ”
The "meeting of the arrangement by agreement" arranged for Evergrande's debtors to vote to approve the scheme has been "indefinitely put on hold" until it admits that "the eligibility for the issuance of new notes cannot be satisfied". On September 22, China Evergrande explained that the scheduled September 25 and 26 meeting would be cancelled due to weaker sales. This means that Evergrande Auto is currently unable to meet the preconditions for the transaction agreed with Newton Group in the previous period.
Not long before, on September 16, according to the announcement of the Nanshan Branch of the Shenzhen Municipal Public Security Bureau, the public security organs have taken criminal compulsory measures against Evergrande Fortune Du Liang and other suspected criminals under Evergrande. Tianyan investigation shows that Evergrande Wealth was established in November 2015, and Du Liang is the legal representative, executive director and general manager of the company. China Evergrande mentioned in the announcement that as of the end of 2022, Evergrande Wealth had not paid principal and interest totaling about 34 billion yuan.
As one of the largest private real estate developers in China, Evergrande Group's liquidity crisis has lasted for nearly two years.
In August this year, Evergrande proposed "bankruptcy protection" in the United States, which attracted widespread attention. Wang Yuchen, director and lawyer of Beijing Jin Law Firm, introduced that bankruptcy protection is not bankruptcy liquidation; In the United States, Chapter 15 of the Bankruptcy Code has provisions related to bankruptcy protection, which is mainly to help business enterprises seek vitality in debt restructuring, avoid bankruptcy risks, and maintain normal operations.
Evergrande's debt restructuring meeting has been repeatedly postponed, sending a pessimistic signal to creditors. The inability to issue new notes means that the company's overseas debt restructuring plans may be blocked. On October 9, China's Evergrande's major foreign creditor group issued a statement saying it was surprised by the group's announcement last month that its offshore debt restructuring plan failed to meet regulatory requirements, citing market sources.
The statement of the foreign creditor group noted that China Evergrande did not provide a response to the documents and reports submitted to the regulatory authorities, despite repeated requests. The basic situation is that China Evergrande will obtain a winding-up order from the court at the winding-up petition hearing on 30 October. In response, the group of foreign creditors urged Evergrande to seek a solution from the regulator to allow the restructuring to proceed.
Next, it is worth paying attention to how Evergrande's foreign debt restructuring plan and the transaction plan with Newton Group will be adjusted.