China Evergrande Group’s subsidiary, China Evergrande New Energy Vehicle Group (NEV), has announced plans to issue new shares. This move is part of the broader restructuring strategy aimed at reducing loan burdens and bolstering liquidity.
Under the terms of the plan, NEV is set to release an aggregate of 5.44 billion new shares at a price of HK$3.84 per share, totaling HK$20.89 billion (approximately $2.67 billion). The primary purpose of this share issuance is to retire outstanding loans owed by NEV, including those associated with China Evergrande and its founder, Hui Ka Yan, as well as his affiliated entity Xin Xin (BVI) Ltd.
See also: Evergrande’s Electric Vehicle Arm Faces Uncertain Future Amidst Liquidity Crisis
Among the newly issued shares, approximately 4.18 billion will be earmarked for China Evergrande, which will then be placed into custody accounts as part of the mandatory exchangeable bonds into NEV shares (MEB), alongside NEV Linked New Notes A2 and NEV Linked New Notes C2. These instruments are destined for issuance to creditors of the company.
Founder Hui Ka Yan will receive 690.1 million shares, which will be deposited into a custody account and utilized as exchangeable assets for MEB.
In a separate development, NEV has also reached an agreement to issue 6.18 billion new shares to NWTN (NWTN.O), a company listed on U.S. stock exchanges. The transaction will involve a total consideration of HK$3.89 billion, reflecting a subscription price of HK$0.6297 per share.
As part of efforts to aid its business recovery, NWTN (Zhejiang) Automobile and Evergrande New Energy Vehicle (Tianjin) have entered into a support agreement for interest-free funding worth RMB 600 million. These funds will be channeled towards the research and development, manufacturing, and sales initiatives of vehicles within the group’s portfolio.
See also: Evergrande NEV still have financial difficulties, may be acquired by another automaker
Upon successful completion of the share issuance to NWTN, the company will acquire a stake of approximately 27.50% in NEV.
In light of these impending changes, the completion of NEV’s loan conversion will result in a dilution of China Evergrande Group’s shareholding interest in NEV to 46.86%, leading to NEV no longer being categorized as a non-wholly owned subsidiary.
