Posted on 03 Jan 2024
Evergrande Auto, a carmaker affiliated with struggling Chinese property enterprise Evergrande, says the share sale deal with Dubai-based Newton Group has lapsed on 31 December 2023.
In a security filing on 1 January, Evergrande Auto explained Newton Group did not agree to extend the deadline for the share subscription agreement and the loan conversion agreement. “The parties and certain stakeholders ... will continue to negotiate on amendment of certain key terms of the proposed transactions and the loan conversion,” Evergrande Auto adds.
On 14 August last year, Newton Group agreed to purchase 27.5% stakes in Evergrande Auto by investing $500m, including interest-free and guaranteed transitional funds of CNY 600 million ($84m) in three tranches.
However, Newton Group has stopped performing relevant obligations since the end of September due to the suspension of trading of Evergrande Auto shares and a series of events related to the Evergrande Group, including the official arrest of its chairman Xu Jiayin.
Some market observers say the collapse of the deal, a life-saving credit line, is a sign of “further weakening of confidence.”
Evergrande Auto says it will make monthly announcements until it can disclose whether it will continue or abandon the transaction.
Following the hold-up, the company’s shares on the Hong Kong Stock Exchange fell 11.76% in a single day on Tuesday, with market capitalisation touching HKD 4.88 billion ($624 million).
The carmaker was founded in 2019 and delivered its first series model, the Hengchi5, in October 2022. Evergrande had warned that the EV unit could be shut down without new funding and was seeking over CNY 29 billion in financing to launch a number of models and achieve mass production.
In addition to EVs, Newton Group is also exploring opportunities in green hydrogen and energy storage in the Middle East, North Africa, Asia and Europe. The company, which has links to China, is building an EV assembly plant in the Khalifa Economic Zone Abu Dhabi (KEZAD) and a parts and supply chain plant in Jinhua City, Zhejiang Province, China. The latter will have the capacity to produce 100,000 EVs/year. Trial production is slated for February and mass production of parts in H2 2024.
Newton Group has not addressed its decision to not extend the long stop date.
Source:Kallanish
