Nov 19, 2020 07:37 PM

BMW’s Main China Venture Partner Sued by Singapore Creditor

What’s new: Brilliance Auto Group Holdings Co. Ltd., parent of German car giant BMW AG’s main Chinese joint-venture partner, faces an arbitration filed by one of its creditors, as Brilliance has transferred some valuable assets amid massive debt defaults.

The case initiated earlier this month by the Shanghai branch of DBS Bank (China) Ltd., a subsidiary of Singaporean banking giant DBS Bank Ltd., involves 779 million yuan ($118 million) and is due to “disputes arising from financing contracts,” according to a Brilliance filing (link in Chinese).

Part of DBS Bank (China)’s loans to Brilliance have been overdue since September, and the bank is seeking to freeze Brilliance’s related assets, a banks spokesperson told Caixin on Thursday.

The spokesperson also said that Brilliance disposed of significant assets without creditor approval, sabotaging all creditors’ interests, while the automaker had never explained to the bank its equity transfer and pledge.

What’s the background: In September, Brilliance entered an agreement to transfer all of the shares it held in Hong Kong-listed subsidiary Brilliance China Automotive Holdings Ltd. to a wholly owned subsidiary, Liaoning Xinrui Automotive Industry Development Co. Ltd. On Nov. 5, Liaoning Xinrui pledged all the shares as collateral for loans from a lender.

The listed company controls a 50% stake in lucrative BMW Brilliance Automotive Ltd., its joint venture with BMW.

Some of Brilliance’s creditors asked the company in a Nov. 9 meeting about how much financing Liaoning Xinrui took out and how it would use the money, but the company refused to divulge specifics and said only that it was for internal use.

Brilliance has been struggling with liquidity issues in recent months since revealing massive debt defaults. The automaker said (link in Chinese) on Monday that it has defaulted on 6.5 billion yuan of debt — including a 1 billion yuan bond it defaulted on last month — and 144 million yuan of interest.

Quick Takes are condensed versions of China-related stories for fast news you can use.

Related: BMW’s China Venture Partner May Be Forced to Restructure

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