Konka Group's associate defaults on shareholder loans, project delays loom

Konka Group's associate, responsible for the "Guankang Old City Redevelopment" project, has failed to repay a shareholder loan of CNY 1.96 billion plus interest. Konka Group holds a 49% stake in the associate, which was provided with a CNY 4 billion shareholder loan, with Konka Group contributing CNY 1.96 billion and another investor contributing CNY 2.04 billion. The loan's initial term was not to exceed three years, with an annualized interest rate of 8%, subsequently renewed at 8% and then 5%.

The overdue amount stems from the associate's inability to repay due to insufficient funds, as the old city redevelopment project's progress has fallen short of expectations. As of June 30, 2025, the associate reported total assets of CNY 3,937.017 million, total liabilities of CNY 5,035.626 million, and a negative net asset value of CNY 1,098.610 million. Konka Group has issued a demand letter and is escalating collection efforts, including potential legal action.

Konka Group has established a special task force to oversee the associate's operations, manage finances, and expedite the redevelopment project. While the overdue loan is not expected to impact Konka Group's normal production and operations, the company acknowledges the risk of not fully recovering the principal and interest due to real estate market fluctuations and policy adjustments.