Shanghai (ZXZC)- Huachen Automotive Group Holdings Company Limited (Huachen Group), the parent of Chinese carmaker Brilliance Auto, officially entered into the bankruptcy reorganization procedure, after the court decided on Nov. 20 to accept an application filed by a creditor about a week ago.

Brilliance Zhonghua V7; photo credit: Brilliance Auto

A person with direct knowledge revealed that Huachen Group will declare bankruptcy on the same day, while the rumor was immediately denied by Qi Kai, vice president of Huachen Group, after being reached for a comment. "I have never heard of the decision, and all businesses go as usual," he said.

The restructuring only involves the business of the group’s self-owned brand, while its public subsidiary and joint ventures with BMW and Groupe Renault all stay out of the issue, according to Huachen. The group is expected to be reborn upon completion of the restructuring, and it will try its best to recover losses of creditors. Besides, BMW Brilliance Automotive (BBA), will still serve as a stable profit source for Huachen and roll out more new products in the future.

Huachen, owned by the government of Liaoning province, reportedly defaulted on a 1-billion-yuan ($151.867 million) bond last month, which was supposed to be cashed by Oct. 23, 2020.   

Brilliance Auto and BMW Group own a joint venture in China, namely the aforesaid BBA. The German carmaker said earlier this week there was no indication that its deal to increase its stake in BBA would be affected by debt issues at Brilliance's parent.

BMW said in 2018 it would pay €3.6 billion ($4.275 billion) in 2022 to increase its stake in BBA to 75% from 25%, and both BMW and Brilliance China Automotive Holdings had signed a corresponding agreement.

The extended contract is valid from 2018 to 2040, and is expected to lead to a further expansion of production capacity in the world’s largest auto market.