Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

Exclusive: BMW deal to lift stake in China venture unaffected by Brilliance parent's debt issues

Stock Markets Nov 17, 2020 05:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. A logo of BMW is seen outside a BMW car dealer, amid the coronavirus disease (COVID-19) outbreak in Brussels
 
BMWG
+0.38%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
1114
+8.89%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Yilei Sun and Julie Zhu

BEIJING/HONG KONG (Reuters) - German carmaker BMW (DE:BMWG) said on Tuesday there was no indication that its deal to increase its stake in its joint venture with Brilliance China Automotive (HK:1114) would be affected by debt issues at Brilliance's parent.

BMW said in 2018 that it would pay 3.6 billion euros ($4.2 billion) in 2022 for a further 25% stake in the venture with Brilliance - its main joint venture in China - adding to its existing 50% holding and giving it control of BMW Brilliance Automotive (BBA).

However, investors have raised doubts over whether the deal will proceed as creditors of Brilliance's parent, Huachen Automotive Group, have applied to a court asking for a restructuring of the company.

"For the BMW Group, there is no indication that the validity of these contracts would be limited by the current situation," a BMW representative told Reuters via an emailed statement on Tuesday.

"The BMW Group and the operating business of the joint venture BMW Brilliance Automotive Ltd (BBA) are not directly affected by the payment difficulties of the Chinese Brilliance Group." Brilliance's parent is officially named Huachen Automotive Group Holdings Company Ltd.

Since September Brilliance has held conference calls with investors to provide assurances that Huachen's debt problems were unlikely to impact the execution of the deal, three people who joined different calls said.

A fourth source close to the government in Liaoning province, where the joint venture is based, told Reuters that the authorities are keen to let BMW increase its stake in the JV and expand manufacturing capacity there as planned.

Brilliance and Huachen did not immediately respond to requests for comment.

Haitong International analyst Shi Ji said that according to the contract terms, 50% of BBA is not directly held by Brilliance, but through two layers of entities that are 100% owned by Brilliance and its subsidiary.

Therefore, even if Huachen Group goes bankrupt or transfers its stakes, BBA's operation is legally protected, he said.

China has seen a smattering of high-profile Chinese debt defaults in recent days, spooking traders and sparking a bond market selloff.

The latest clutch of defaults, which Goldman Sachs (NYSE:GS) noted are bigger and include more state-owned enterprises than last year, highlight that investors need to pay close attention to avoid being caught in the credit cleanup.

Bondholders see a bankruptcy restructuring by Huachen to be unfavourable as they will likely end up getting little out of the process.

Sources told Reuters in September that Chinese state-backed investors are considering taking Brilliance private, although that is not expected to affect BMW's plan to lift its stake.

Exclusive: BMW deal to lift stake in China venture unaffected by Brilliance parent's debt issues
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email