After a suspension of trading for five trading days, on the evening of May 26, Evergrande Automobile (00708.HK) announced that the liquidators of China Evergrande (03333.HK), Evergrande Health Industry Group Limited, Acelin Global Limited, and others, have entered into a term sheet with a third-party buyer for the proposed sale of their shares in Evergrande Automobile.

According to the aforementioned term sheet, the buyer and seller will further enter into a definitive sale and purchase agreement regarding the sale. It was disclosed that China Evergrande collectively holds approximately 6.347 billion shares in Evergrande Automobile, accounting for about 58.5% of the latter's total issued shares, all of which will be put on the market.

The announcement stated that after the execution of the sale and purchase agreement and subject to its terms and conditions, 3.14 billion potential shares for sale will be acquired immediately, which is about 29% of Evergrande Automobile's issued shares; another 3.203 billion potential shares for sale, which is the remaining approximately 29.5%, will become the subject of an exercisable option for the buyer within a certain period after the date of the sale and purchase agreement.

According to Evergrande Automobile's financial report for 2023, China Evergrande collectively holds 6,347,948,000 shares in Evergrande Automobile, with a holding ratio of about 58.54%. This also means that after the completion of the aforementioned transaction, China Evergrande will no longer hold shares in Evergrande Automobile.

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As early as January 29 of this year, the Hong Kong court issued a winding-up order to China Evergrande. On the same day, China Evergrande made an announcement and disclosed that Edward Simon Middleton and Wong Wai-sze of Alvarez & Marsal were appointed by the High Court as the joint and several liquidators of China Evergrande.

Huang Lichong, President of Hui Sheng International Capital, once stated to First Financial that once the court is satisfied that one of the requirements set out in Article 177 (1) of the Company Winding-Up Ordinance (including the company's inability to repay its debts) is met, a winding-up order can be issued against the company. During the compulsory liquidation period, the powers of the company's directors will be suspended, and the liquidator, under the supervision of the court, will be responsible for recovering and realizing the company's assets, investigating the company's affairs, determining the claims of creditors, and distributing from the liquidation estate to the creditors.

At present, the aforementioned equity sale of Evergrande Automobile is being advanced under the guidance of this winding-up order. Due to the winding-up order and the appointment of the liquidators, China Evergrande's debt restructuring plan, which is being advanced, will not proceed in the previous manner, and the application for debt restructuring filed with the U.S. court has been withdrawn. At the same time, the joint and several liquidators of China Evergrande are focusing on fulfilling their duties to preserve, maximize, and return value for creditors and other stakeholders.

It is worth mentioning that Evergrande Automobile will also obtain a credit agreement from this transaction. According to this, the buyer will provide a credit line for Evergrande Automobile to finance its ongoing operations and the development of its electric vehicle business.

Evergrande Automobile also emphasized that the aforementioned share transfers and potential credit facilities and other potential transactions are still subject to further due diligence, including but not limited to due diligence on the financial proof of potential buyers and matters related to Evergrande Automobile's assets, liabilities, business, financial and legal affairs. At the same time, trading in Evergrande Automobile's shares will resume at 9:00 a.m. on May 27.

Evergrande Automobile also made it clear that the group is currently facing a severe shortage of funds, and the Tianjin factory has not resumed production since the beginning of this year, and has not resumed production as of the date of the announcement.The Tianjin factory is also one of the important automobile production bases for Evergrande Automobile. By the end of 2023, the Tianjin manufacturing base produced Hengchi 5 according to market demand, which began mass production in September 2022, with a total of 1,700 vehicles produced and rolled off the line, not meeting the relevant requirements. By the end of 2023, more than 1,389 vehicles had been delivered in total.