Shenyang weighs stake in Brilliance, report says

A deal could provide funds for Brilliance Auto Group, also sometimes referred to as Huachen Automotive Group Holdings Co., to repay creditors. The company is looking to exit the restructuring process that began in 2020 after it defaulted on debt.  

The administrator overseeing the restructuring has solicited strategic investors that may bid for all or part of Brilliance Auto Group’s assets, including the Brilliance China stake. They are set to sign agreements on divesting the assets as soon as the end of May, the people said. Shenyang’s government has set up a new entity called Shenyang Automobile Co. for the proposed acquisition, the people said.

Any deal would be included in the bankruptcy settlement, which is subject to final creditor approval, one of the people said. Creditors rejected the company’s first proposal in July.

Brilliance China holds a 25 percent stake in BMW Brilliance Automotive, its joint venture with BMW, after the German automaker boosted its stake to 75 percent from 50 percet late last year for about €3.6 billion ($3.9 billion). The deal saw BMW record in 2022 a one-time gain of €7.7 billion from the re-measurement of its equity interest in the venture.

Buying Brilliance Auto Group’s entire 30 percent stake would make the local government the biggest shareholder in Brilliance China, giving it effective control over the company’s stake in the BMW joint venture.

BMW’s China venture posted strong results despite a challenging operating environment due to COVID-19 last year. It launched two new models in 2022 and saw EV sales in China grow by more than 80 percent to over 39,000 cars, according to Brilliance China’s annual report.

Brilliance China reported net income of 2.4 billion yuan ($348 million) from the JV in 2022, compared to 14.5 billion yuan a year earlier, attributing the decline to the sale of the 25% stake to BMW, the report shows. As a result of the disposal, the company now has cash and equivalents amounting to 28.5 billion yuan.