LIFAN COMPANY LAUNCHED BANKRUPTCY PROCEEDINGS

Lifan Holdings has applied to the Chinese judicial authorities for reorganization. It is known that the company's statement was accepted by the Fifth Intermediate People's Court of Chongqing.

The company does not have enough assets to get rid of the debt burden. Sources note that the reorganization will primarily affect such areas of work of the company as the Passenger Cars, Import and Export. In fact, we are talking about starting a bankruptcy proceedings.

Publications about possible bankruptcy of the company began to appear last year. The press service of the company then stated that the Lifan brand would overcome all difficulties by obtaining the necessary loans from the financial institutions of China and, accordingly, reorganizing its assets.

As a result, the company managed to attract 12.6 billion yuan loan from the Chinese banking institutions, as well as receive 10.5 billion in non-bank loans.

In a normal situation, the holding could hope that the situation would change for the better. But the COVID-19 pandemic has led to the closure of many car dealerships in various countries, and the company sold just over 1.5 thousand cars in 2020. 978 of them were created on the basis of classic internal combustion engines, and another 549 cars were made by means of the alternative fuel technologies. This meant a 95.3% drop in sales for ICE vehicles and a twofold drop (56.3%) in the segment of cars using alternative fuels.

It is clear that the company's loss of capitalization of 4.7 billion yuan ($ 680 million) last year could have been perceived as a disaster, given that this amount exceeds all the profits that the company has acquired over the previous 9 years. But 2010 was a high point for the Lifan brand - the company became the first Chinese car manufacturer that managed to list its securities on the Shanghai Stock Exchange.

Now, if the application for the reorganization is accepted by the Chinese judicial authorities, Lifan shares will be temporarily removed from the exchange and unavailable for trading.

It is known that the securities owned by Lifan Holdings account for just over 47% of the total capitalization (this is about 618.5 million shares) in the capital structure of Lifan.

Chinese media representatives note that the car holding can still undergo reorganization and survive, despite the difficult financial situation. The reason for this optimism is the motorcycle production which was the first step of Lifan.

The direction of "smart vehicles", formed at the junction of the IT industry and transport production, is currently actively developing in China. In June 2020, Lifan reached an agreement with China Mobile Chongqing telecommunications Company regarding plans to develop the smart motorcycles. If the plans are implemented, then this niche could make Lifan a leader in industrial development once again. Whether the brand will remain in the automotive market is a big question.