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Evergrande Auto's strategic investment with Newton Group has ended

TraderKnows
TraderKnows
04-07

Evergrande Auto announces that its cooperative plan with strategic investor Newton Group has been terminated.

In the latest announcement, Evergrande Auto announced that its cooperation plan with strategic investor Newton Group has been terminated, as the previously proposed transaction and debt-to-equity swap scheme had made no progress. This news directly affects Evergrande Auto's future development plans and financial conditions.

According to the announcement, Evergrande Auto stated it would no longer convene a shareholders' meeting to approve any proposals related to the transaction, nor would it issue a circular concerning revisions to the transaction terms. This move indicates that the company has paused its cooperation with Newton Group, leading to the cessation of the transaction. The original plan for the transaction included an investment of about $500 million from Newton Group to Evergrande Auto and the provision of 600 million yuan in transitional funds, as well as solving Evergrande Auto's debt issues through a debt-to-equity swap scheme. However, due to many unmet preconditions, this transaction has been shelved.

The impact of this news goes beyond the termination of the partnership itself. According to the financial data released by the company, by the end of last year, Evergrande Auto's total liabilities amounted to 72.543 billion yuan, far exceeding its total assets of 34.851 billion yuan. Additionally, the company incurred a loss of 11.995 billion yuan last year, while revenue growth primarily came from property sales rather than automotive production. Moreover, the company faces a significant amount of unsettled debt and overdue commercial bills, as well as several billion yuan in litigation cases.

For Evergrande Auto, the termination of strategic investment has exacerbated its financial difficulties. According to the financial report, the company has arranged for some staff to take leave due to funding reasons, and production at its Tianjin factory has also been suspended. Furthermore, the company is facing financial pressures for future development.

Despite facing a grim financial situation, Evergrande Auto is still seeking solutions. The company states that it will make every effort to introduce strategic investors and actively raise funds to maintain the group's survival and future development plans.

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Debt-to-Equity Swap

Debt-to-equity conversion refers to the process of transforming a company's debt into equity.

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