Shareholders of China Evergrande New Energy Vehicle Group (HKG: 0708) have approved a proposal to dispose of two subsidiaries in a restructuring, the company said in a filing with the Hong Kong stock exchange on Friday night.
More than 50% of the votes under the EV company, a unit of embattled property developer China Evergrande (HKG: 3333), were cast at a Friday general meeting in favor of a proposal raised in late April, the filing said.
The EV unit on April 25 announced the plan to sell two debt-laden companies to another unit under China Evergrande as part of the auto firm’s restructuring.
The EV unit was expected to book a $3.6 billion gain from the transfer, while the two companies to be sold held 47 property projects altogether, said a previous stock filing by the EV unit.
The deal would help the EV unit focus on the new energy vehicle segment and could help improve its valuation and eventually “may help to attract investors to Evergrande Auto and raise funds”, said a separate filing by the group company.
The restructuring comes as China Evergrande faces a deepening financial crisis. The company is struggling to repay more than $300 billion in debt, and has been selling off assets to raise cash.
In addition to the restructuring of its EV unit, China Evergrande has also been selling off other assets, including stakes in its property businesses and its football club, Guangzhou Evergrande.
The company has said that it is committed to repaying its debts and completing its restructuring plan. However, it is unclear how long it will take for China Evergrande to emerge from its financial crisis.
The Financial Crisis at China Evergrande
China Evergrande is one of the most indebted companies in the world. The company has been struggling to repay its debts for several years, and the situation has worsened in recent months.
In September 2021, China Evergrande missed a payment on a $83.5 million bond. The company then missed a number of other payments, and in December 2021, it was downgraded to “default” by Fitch Ratings.
The financial crisis at China Evergrande has had a ripple effect throughout the Chinese economy. The company’s troubles have led to a decline in property prices, and they have also raised concerns about the stability of the Chinese financial system.
The Restructuring Plan
China Evergrande has been working on a restructuring plan for several months. The plan includes the sale of assets, the reduction of debt, and the improvement of its operational efficiency.
The sale of the two subsidiaries to another unit under China Evergrande is part of the restructuring plan. The deal is expected to help the EV unit focus on its core business and improve its valuation.
The restructuring plan is still in its early stages, and it is unclear how successful it will be. However, the plan is a necessary step for China Evergrande to emerge from its financial crisis.
The Future of China Evergrande
It is too early to say what the future holds for China Evergrande. The company is facing a number of challenges, but it is also taking steps to address those challenges.
If the restructuring plan is successful, China Evergrande could emerge from its financial crisis as a stronger company. However, if the plan is unsuccessful, the company could face bankruptcy.
Only time will tell what the future holds for China Evergrande. However, one thing is for sure: the company is facing a critical juncture in its history.
