HONG KONG / SHANGHAI – The parent company of BMW’s joint venture in China, Brilliance Auto Group Holdings Co., faces increasing scrutiny from investors involved in the state-owned company’s ability to juggle its debt as the pandemic weighs profits.
Brilliance Auto is the parent company of Brilliance China Automotive Holdings Ltd., which is listed in Hong Kong, which manufactures cars with BMW in China, a joint venture. The joint venture builds series 3, 5 and 1 together with the SUV X1 and X3 in China for BMW. It also builds the 60H from its exclusively Chinese logo, Zinoro, according to the company’s website data.
More speculation is more likely that the organization will struggle to meet its commitments after its banks establish a creditor committee to coordinate debt claims. The organization must pay 1.370 million yuan ($200 million) in notable local bonds this year, according to knowledge compiled through Bloomberg.
Brilliance Auto, also known as Huachen Automotive Group, saw one of its bonds fall on land by 35% in the interbank market on Thursday to an all-time high amid doubts about his ability to pay. That percentage value of Brilliance China Automotive will fall on the same day.
The monetary fitness of the world’s largest automotive market operators is largely monitored by domestic and international investors, as leveraged corporations struggle with pandemic tension and declining domestic consumption.
After several notable government-linked borrowers, there is also a growing interest in the government’s point of intervention faced by these corporations and the benefits to foreign corporations associated with them.
Brilliance Auto has already agreed to sell some of its shares in the Hong Kong-listed subsidiary to the public unit.
With the option of extra engagement sales on the horizon, the long-term ownership of this leading unit remains uncertain. In addition, the company is also expected to give up its joint venture with BMW until 2022, a very important source of profit for the group.
The history of Brilliance Auto dates back to 1949, when the People’s Republic of China was founded. It is one of the largest state-owned enterprises in the northeastern province, employing 47,000 people. It has 4 publicly traded corporations in Hong Kong and Shanghai, and about 160 total or partial-owned sets, according to website data.
Brilliance Auto made a net profit of 11 billion yuan in 2019, 12% more than last year, largely thanks to contributions from the joint venture with BMW, according to its most recent annual report.
The Chinese automaker says it has refunded all bonuses that have expired without any default, according to a maturity released Tuesday. It stated that its operations remained general and that it would continue to meet its debt obligations.
Brilliance Auto’s disclosure calls received no response.
Brilliance Auto has low profitability and relies heavily on its joint venture with BMW, according to a June report by Golden Credit Rating International. In addition, the joint venture’s sales are expected to fall this year due to the call for a pandemic environment, the Chinese scoring company said.
Investors are now focusing more on Brilliance Auto’s ability to meet debt repayment over the next two years, and the maximum of their long-term debt will be affected by falling prices.
Market participants also keep a close eye on the automaker’s keeping their word that it will have no problem paying its obligations overdue before March, as reported through local Chinese media.
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