Parent of BMW's China partner Brilliance applies for company restructuring

SHANGHAI/BEIJING -- China's Huachen Automotive Group, parent of BMW's China joint venture partner Brilliance Automotive Holdings, said Monday that its creditors had applied to a Chinese court to restructure the company.

Huachen faces the prospect of restructuring after Gezhi Automobile Technology filed an application to the Shenyang Intermediate People's Court, Hong Kong-listed Brilliance Auto said in an exchange filing on Sunday.

Huachen, owned by the government of Liaoning province, said it was uncertain if it would be able to enter restructuring, in a statement on the website of interbank bond market clearing house China Central Depository & Clearing Co.

The company said that if the court was unable to approve a restructuring plan, or if the approved plan could not be executed, the court would terminate the restructuring process and declare the company bankrupt.

Huachen defaulted on a 1-billion-yuan ($151.88 million) bond last month, joining a growing number of delinquent state companies in a development that hit investor confidence and roiled China's credit bond market.

Impact on Brilliance

Huachen's bankruptcy would have little impact on the operation of Brilliance but could upset plans for an expected privatization, Daiwa Capital Markets said in a note to clients.

Reuters reported in September that Chinese state-backed investors are considering taking Brilliance private, citing people familiar with the matter.

The latest clutch of defaults are bigger and include more state-owned enterprises than last year, Goldman Sachs has said.

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