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Bond Market News

Evergrande’s EV Unit Warns of Production Delays Unless It Secures Capital

August 31, 2021

China Evergrande cannot seem to catch a break as the flow of bad news continues for the highly indebted group. In the latest, Evergrande’s Hong Kong-listed EV unit China Evergrande New Energy Vehicle Unit Ltd (NEV) warned of production delays should the company fail to secure capital. As per the exchange filing, the company said, “The mass production of Hengchi vehicles has entered the final stretch, nonetheless the group is still facing challenges on its cash flows. If the group lacks further capital contribution in the short term, the mass-production timetable of new energy vehicles may have to be delayed.”

The announcement accompanied Evergrande NEV’s financial results for 1H 2021 where the company reported a widening operating and net loss of RMB 4.034bn ($624mn) and RMB 4.822bn ($745mn), up ~350% and ~96% vs. last year respectively. Revenues however improved compared to last year driven by growth in its largest segment, Health Management that includes “Internet+”, community health management, international hospitals and elderly care and rehabilitation. Health Management revenues grew 54% to RMB 6.886bn ($1.064bn), compensating for the 30% drop in revenues from New Energy Vehicles to RMB 36.984mn ($5.7mn). The company also managed to trim its debt with total borrowings of RMB 35.997bn, down 51% from end-2020. The group’s gearing ratio (borrowings to assets) also improved to 21.8% vs. 48.65% as on December 31, 2020. The company ended 1H 2021 with cash of RMB 12.5bn ($1.93bn) vs. RMB 13.3bn ($2.06bn) of borrowings and RMB 73bn ($11.3bn) of trade payables due within one year, as per Bloomberg.

Evergrande’s bonds continue to trade at distressed levels with its 8.25% bonds due March 2022 trading at 46.5 cents on the dollar.

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