China Evergrande electric vehicle company warns of tightening liquidity

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The once top-flight China Evergrande Group’s electric vehicle unit warned it faces a “severe shortage of funds” and may not be able to meet its financial obligations, adding to the challenges facing its company heavily indebted mother is facing.

In a filing Friday night in Hong Kong, China Evergrande New Energy Vehicle Group Ltd., or Evergrande Auto, also said it had stopped paying some operating expenses and some companies had stopped providing it with supplies. The electric vehicle maker said there had been no significant progress in restarting projects that had already been stalled due to late payments.

Evergrande Auto said it is still talking to new investors about a possible investment in the group and is negotiating the sale of some projects and assets in China and abroad. But he warned that if he failed to strike a deal quickly, he would struggle to pay salaries and other expenses.

“Given the difficulties, challenges and uncertainties associated with improving its liquidity, as mentioned above, there can be no assurance that the group will be able to meet its financial obligations under the relevant contracts,” said Evergrande Auto.

China’s Evergrande chairman Hui Ka Yan set out to overtake Tesla Inc., local rival NIO Inc. and other big players to build the world’s largest and most powerful electric vehicle maker here. 2025. For a while, investors have bought into the vision, with Evergrande Auto’s market capitalization hitting $ 87 billion earlier this year. But the stock has since collapsed and is now down around 93% so far this year.

The parent company, Shenzhen-based Evergrande, is the world’s most indebted real estate developer and China’s largest issuer of low-quality rated debt, with around $ 19 billion in listed dollar bonds. The prices of these bonds have fallen well below their face value, reflecting investor pessimism about Evergrande’s ability to repay its debts.

Investors who hold some of the group’s U.S. dollar bonds had not received interest from the real estate giant as of Thursday’s deadline, people familiar with the matter said. If Evergrande doesn’t pay within a 30-day grace period, it would pave the way for what could be the biggest default on a dollar bond ever by a business in Asia.

Evergrande has sought to raise funds by selling shares of Evergrande Auto and other subsidiaries, as well as potentially selling its office building in Hong Kong. In May, Evergrande sold a 2.66% stake in the EV unit for the equivalent of about $ 1.36 billion, reducing its stake to just under 65%.

In Evergrande Auto’s first half results in August, the automaker said its board believes it has sufficient working capital to meet its financial obligations over the next 12 months. Guangzhou-based Evergrande Auto also operates various healthcare companies.

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