Car Inc.’s Creditors Still Stuck in Chairman’s Web

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Car Inc. has lost the chairman that it shared with scandal-tarred Luckin Coffee Inc., (almost) cut a deal for a state-backed bailout, and is working with lenders for waivers on debt.So, all’s well with China’s largest car rental company? Not quite.Let’s start with the chairman’s departure. On Wednesday, Charles Lu Zhengyao resigned to spend more time at affiliate UCAR Inc., one of the rental firm’s largest shareholders, and other businesses. This is good news, in theory, as he’s likely to be distracted by the deepening accounting fraud case reported by local media at his much-hyped coffee chain. The reality is more complicated, but investors once again have cheered news that his hold on Car Inc. is easing.Is it? Even if Lu is out, Car Inc. and UCAR remain deeply intertwined. Investors should wonder whether his name coming off the securities filings really means he’s gone for good. Some other board members remain affiliated with UCAR, or are management-level executives there. The ex-chairman, through various entities he controls, conducts several related-party transactions.As of the first quarter, the rental company was owed almost 500 million yuan ($70 million) in trade receivables from its parent and owed around 100 million. UCAR was Car Inc.’s largest customer, largely due to fleet rentals. As of March 30, Car Inc. also held a stake in UCAR, losing money on it last year as fair value decreased. They’re tied up in other ways: Car Inc. shelled out 788 million yuan in the last half of 2019 toward UCAR’s subsidiary Beijing Borgward Motor Co. 

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