EV unit of China's Evergrande Group struggles with bankruptcy

Beijing [China], August 8 : The China Evergrande New Energy Vehicle Group (CENEVG), an electric vehicle production of Chinese Evergrande Group revealed that previously they had initiated talks with potential buyers, however, are now struggling with bankruptcy proceedings, Nikkei Asia reported.
They stated that now, a bankruptcy process was initiated by some units of the entity that could dampen the buying process.
This issue unfolded after a Chinese court on Friday heard an application from individual creditors of being heavily indebted, Nikkei Aisa reported.
Previously, the liquidators of the CENEVG mentioned that they were seeking billions of dollars from several of the property developer's executives, including its founder Hui Ka-Yan.
The bankruptcy and the difficulty of the company's sale highlight the difficulty of Chinese property developers hit with winding-up orders amid China's nosediving property sector revenues. However merely days before the initiation of the bankruptcy application, CENEVG had accepted having discussions with anonymous buyers, but no agreement was reached yet.
Lance Jiang, a Hong Kong-based restructuring lawyer from international firm Ashurst while referring to the matter stated, "Any potential buyer would need to handle the domestic units' creditors carefully, not only the offshore parent company."
He said the mainland court could even initiate bankruptcy administration of the domestic units and introduce a strategic investor that could "squeeze out" the Hong Kong-listed New Energy Vehicle parent company completely.
Similarly, earlier in May, the liquidators working for Evergrande Health Industry Holdings and Acelin Global which totals about 58.5 per cent of the issued shares of the CEBEVG had entered into negotiations with potential buyers.
In that proposal, the prospective buyer of that unit would have to provide credit for helping the company with its EV operations, which currently suffers from a "severe shortage of funds," according to a stock exchange filing, as reported by Nikkei Asia.
Evergrande, the property developer giant of China, holds more than 50 per cent of the EV Group as of June 2022, according to its liquidation order from January.
A Nikkei Aisa source familiar with Evergrande's reconstruction said, "If the assets being liquidated are core assets, it would impact investor confidence to move forward with the deal" for Evergrande New Energy, demanded anonymity."
"The Hong Kong stock exchange listed shares of Evergrande New Energy tumbled and witnessed a dip of 7.94 per cent on Monday. The Chinese real estate company according to Nikkei Asia has more than USD 300 billion in liabilities. Four months after the order, Evergrande's liquidators said they had managed only a "modest realization of assets".
The liquidators are also seeking to sell Evergrande Futures (Hong Kong) and Evergrande Securities (Hong Kong), which have a share capital of 15 million Hong Kong dollars or USD 1.9 million and HKD 365 million, respectively, Nikkei Asia reported earlier.
Evergrande previously had failed to complete a plan to sell 27.5 per cent of the EV group's shares for HKD 3.88 billion to NWTN, a Nasdaq-listed company founded by a Chinese entrepreneur. Reportedly amid ongoing China's real estate crisis, the recovery of assets is a struggle for offshore creditors of property developers under winding-up orders.