Troubles at troubled property developer China Evergrande Group (3333.HK) have cast a shadow over Nasdaq-listed Newtown Group's (NWTN) investment in its electric vehicle unit.
China Evergrande New Energy Vehicle Group Limited (0708.HK) announced on Sunday evening that due to significant uncertainties surrounding the parent company of Evergrande Automobile, Including Evergrande chairman Xu Jiayin, the Dubai-based carmaker said it would "suspend" its obligations under the share subscription agreement.
In August, the Newtown Group said it would invest $500m for a 28 per cent stake in Evergrande. The investment will help China Evergrande's auto business fund an expansion of its factory, which has been delayed by financial problems at its parent company.
In a filing to the Hong Kong stock exchange, the electric car maker cited a letter dated September 29 that said: "The funding provider (Newton Group) has no obligation to pay the second and third tranches of transitional support funds to the recipient (Evergrande Automobile) for the time being."
Evergrande said the letter from Newtown did not constitute "a notice of termination of the share subscription Agreement and there is no request to terminate the share Subscription Agreement as at the date of the letter".
Evergrande Motor said it had written back to Newtown Group expressing its willingness to renegotiate with the subscription policy the required adjustments to the proposed transaction.
China Evergrande said in late September that its chairman was under investigation by authorities on suspicion of criminal wrongdoing and that it owed lenders, contractors and suppliers tens of billions of dollars in bills. Regulators have also blocked part of the company's restructuring plans.
Evergrande said the Newtown Group had asked whether the parent company's debt restructuring plan needed to be readjusted and whether there were any new restructuring plans.
Evergrande's shares have been suspended since September 28 and will resume trading on the Hong Kong Stock Exchange from October 9.