Huachen Automotive Group, an indebted state-run Chinese car maker, has been ordered to undergo a bankruptcy restructuring after defaulting on about 6.5 billion yuan (US$992.7 million) in debt.

The Shenyang Municipal Intermediate People’s Court on Friday ordered Huachen to take restructuring measures after the holding company declared its inability to repay debts. Citing disclosed financial documents, Apple Daily said that the group has incurred a total liability of 132.8 billion yuan.

The group is the parent company of Hong Kong-listed Brilliance China Automotive Holdings, which runs the joint ventures that produce the BMW and Renault brands in China. A spokesperson for Huachen said the two European brands would be left unscathed by the court ruling.

News of the bankruptcy was greeted as a positive step on the Hong Kong stock market, where the share price of Brilliance China Automotive Holdings closed 8.25% higher at HK$7.48 (US$0.96) on Friday. Brilliance owns 25% of the BMW joint venture.

The State-owned Assets Supervision and Administration Commission, China’s watchdog over state-run assets, described Friday’s development as the result of an “accumulated debt” situation. A prolonged period of “bad management” led to the company’s demise, it said.

Debt crises have embroiled several Chinese companies recently; those risking defaults have included Huachen and semiconductor conglomerate Tsinghua Unigroup. According to Apple Daily, HNA Group, which operates embattled Hong Kong Airlines, has also requested relief from a recent round of loan repayments.

A Huachen spokesperson said the company’s current priority is to make good on its creditors’ losses, saying the joint ventures overseeing the European automotive brands is a “stable source of profits” that will continue to thrive.

According to the China Association of Automobile Manufacturers, Huachen ranked ninth in total car sales in the first ten months of this year.

Established in 2002, Huachen was originally a privately owned enterprise founded by tycoon Yang Rong. But he fled to the United States after apparently losing a legal feud with the now-disgraced former Communist Party star Bo Xilai. Yang was expelled from the company before it was acquired by the state.

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