LeEco units owing money to suppliers blacklisted as defaulters by China’s supreme court
The embattled technology company once seen as a potential threat to Apple and Tesla suffers another body blow
Things just got even worse for LeEco, the debt-laden Chinese technology giant once touted as a serious challenger to the likes of Apple, Tesla and Amazon.
In another body blow for its embattled founder, Jia Yueting, China’s highest court has placed two of the company’s subsidiaries on a blacklist of debt defaulters owing money to suppliers.
Inclusion on the list places restrictions on some of the firms’ executives, including a ban on travelling by aeroplane in the mainland.
The blacklisting is the latest symptom of the worsening financial crisis facing the once high-flying group.
According to documents dated September 7 on a Supreme People’s Court website, Leshi Holding (Beijing), a unit controlled by Jia, and Leshi Yidong, the mobile affiliate of LeEco group, have a total unpaid debt of 107 million yuan (US$16.38 million). The reason given for listing them as defaulters is that they “are able to repay the money but refuse to do so.”
“The listed debts of the two companies are just the tip of iceberg for LeEco,” said Hu Jiaming, a Shanghai-based analyst with Capital Securities. “One of the challenges the group has been facing is to decide whether to repay the debts first or use the money to expand the business first.”
Cheng Shisheng, an executive of Leshi Holding, said in a statement that “the company’s asset value is much higher than its debt and it is capable of repaying all debts” and that it is “actively disposing its non-listed assets”.
The supreme court’s move comes as LeEco battles to stay afloat amid a pile of mounting debt. Jia once envisioned building his company into a global empire capable of taking on the American tech giants by making expensive forays into smartphones, television manufacturing and electric car development.
Among the two blacklisted companies’ creditors are Hong Kong-listed AAC Technologies and Changzhou-based Lisheng Technologies, both suppliers of LeEco’s mobile affiliate.
Jia, the 44-year-old founder of LeEco, announced in November that the firm was facing a cash crunch and admitted earlier this year that the problem was bigger than he had thought, because a 16.8 billion yuan strategic investment by property tycoon Sun Hongbin of Sunac China in January had not helped.
Since then, things have gone from bad to worse. Mainland technology news website 36kr reported that LeEco was 34.3 billion yuan in debt, excluding what it owes its suppliers, as of March 31. LeEco, however, said that amount was an overestimate.