Middle East Tycoon Halts $500 Million Investment in Evergrande EV Unit as Chairman Under Surveillance

Dubai-based NWTN Inc decided to halt planned share subscription involving a strategic investment of $500 million, citing significant uncertainties due to recent developments of China Evergrande Group,

BEIJING, October 10 (TMTPost)— The electric vehicle (EV) unit of China Evergrande Group may lose a key investor as the chairman of highly indebted property developer was confirmed under police surveillance.

Credit:TMTPost

Credit:TMTPost

In a letter on September 26, NWTN Inc., a Dubai based green energy company, informed that it decided to halt planned share subscription, citing significant uncertainties due to recent developments of China Evergrande Group, according to a filing of China Evergrande New Energy Vehicle Group Ltd (EVGRF) with the Hong Kong Stock Exchange (HKEX). EVGRF sent a letter to NWTN on October 5 as a reply to express its willingness to renegotiate adjustments of subscription agreement, the filling said. it added that EVGRF will release further developments in accordance with relevant listing and takeover rules.

EVFRF’s latest filling suggested an investment agreement settled two months ago may be dropped NWTN announced on August 14 that it has signed an agreement to make a strategic investment of US$500 million in EVGRF. Once the proposed transactions under agreement is expected to close in the fourth quarter of the year , NWTN will acquire approximately 27.50% of the total number of enlarged issued ordinary shares of EVGRF and the right to nominate a majority of EVGRF's board. The transaction is subject to customary and other closing conditions, including but not limited to the effectiveness of the debt restructuring of EVGRF’s parent Evergrande Group, confirmation of a debt repayment plan by certain creditor of EVGRF, and receipt of applicable regulatory and shareholder approvals.

EVFRF’s Hong Kong-listed shares were suspended from trading since September 28, when its parent that day suggested its founder and chairman Hui Ka Yan may be charged for the company’s debt crisis.

Evergrade said Hui Ka Yan has been subject to “mandatory measures” under the law “due to suspicion of illegal crimes”, according to a filling on September 28. The filling said Evergrande was informed by authorities about Hui’s being under investigation, without giving any details.

Hui was taken away along with his younger son Peter Xu, who used to lead Evergrande’s wealth unit, Chinese business and financial media outlet Yicai learned from an insider right after abovementioned filling. Besides Hui and his son, a number of former Evergrande executives were said to be detained. The first executive to be taken away was Ke Peng, the former executive president of Evergrande Group, who was nabbed by the police for investigation in January in connection with his involvement in Evergrande's Shenzhen’s shanty town revamping. Hui’s being under “mandatory measures” is sort of different with the reported residential surveillance, and he is very likely to be committing multiple crimes, which means it could take quite a lot of time to decide, Chinese newspaper 21st Century Business Herald cited a criminal law expert.

Evergrande is the world's most indebted property developer, which first declared a default on its debt in late 2021 when the second largest property developer in China had a total of more than US$300 billion in liabilities. Financial reports disclosed in April showed the company’s debt load reached RMB2.44 trillion as of December 31, 2022, reducing RMB140 billion from late 2021. The insolvency gap increased from RMB 473.1 billion to RMB599.1 during the year 2022.

Prior to Hui’s detaining, Evergrande has signaled that the debt crisis fallout is worsening. It surprisingly disclosed on September 22 that it won’t hold meetings about proposed debt restructuring on September 25 and 26, citing worse-than-expected sales since it announced the meeting schedule in March. While not elaborating creditors’ demand, the company said it would make public statement if there were any change about terms of restructuring proposal. Days after announcing dropping the restructuring meeting plan, Evergrande said it is currently unqualified for issuance of new notes as its subsidiary Evergrande Real Estate Group Limited is under investigation by the China Securities Regulatory Commission (CSRC), China’s top securities regulator.

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