Pressure piles on China's LeEco as assets frozen after bank complaint (updated)

Coolpad

04/07/2017 11:42

* Court freezes assets of LeEco firms, CEO worth $182 mln 
    * Move came after China Merchants Bank complains about 
non-payment 
    * Asset freeze move is over loans to smartphone 
business-LeEco 
 
 (Adds details from court document) 
    By Jess Macy Yu and Shu Zhang 
    TAIPEI/BEIJING, July 4 (Reuters) - Chinese tech group LeEco 
is under growing pressure from its creditors and business 
partners, with a court in Shanghai  ordering some of its assets 
frozen over late payments to a bank. 
    The latest financial woes of the conglomerate, which has 
interests ranging from smart cars to online content, have 
surfaced days after founder and CEO Jia Yueting said its cash 
problems were "far worse than expected" and that billions of 
dollars in funds raised in recent months were not enough to help 
it ride out the crunch.  urn:newsml:reuters.com:*:nL3N1JP3F1 
    China Merchants Bank Co Ltd  600036.SS  said in a statement 
on Tuesday it had applied to have some of LeEco's assets frozen 
because a subsidiary, Leview Mobile HK Limited, had been late on 
making interest payments on a loan. 
    "CMB's Shanghai branch repeatedly urged repayment without 
success and so sought to use legal means," the bank said, adding 
it now had risks related to the loan under control and did not 
rule out using "friendly talks" to resolve the issue. 
    LeEco, which controls smartphone maker Coolpad  2369.HK  and 
its core listed smart TV unit Leshi Internet Information and 
Technology Corp  300104.SZ , has been battling huge financial 
pressure since Jia admitted last year the company had expanded 
too fast and was facing "big company disease".  urn:newsml:reuters.com:*:nL4N1D83OU 
    According to a court document dated June 26, the Shanghai 
High People's Court approved a freeze order on 1.237 billion 
yuan ($182 million) of assets of Leview Mobile HK Limited, two 
other LeEco-linked firms as well as CEO Jia and his wife. 
    The court document, which was seen by Reuters, said it had 
found CMB's application to be "in accordance with the law" and 
that therefore the freeze order ruling would come into immediate 
effect. 
    Local media outlets earlier reported the asset freeze. 
    A LeEco spokesman said the case concerned "financing loans 
related to LeEco's smartphone business", but added LeEco had 
enough collateral to cover the loan. 
    "Our senior executives are currently in close communication 
with various financing units of CMB, and we hope to resolve the 
related debt issue very soon," he said. LeEco also hopes to 
raise further cash to help it "get back to normal", he added. 
    In late 2015, CMB agreed a 10 billion yuan loan to LeEco, 
part of which was used to acquire a stake in Coolpad and was the 
biggest bank loan to LeEco at the time, financial magazine 
Caixin said on Monday, citing public information. 
     
    SUPPLIERS, PARTNERS 
    Some other partners and suppliers are re-examining their 
exposure to the troubled group. 
    This week, local media reported an affiliated company of 
electronics manufacturing giant Foxconn divested its 20 percent 
stake in LeEco's TV and video unit Leshi Zhixin, a blow to the 
company's core business and one of its most profitable units. 
Foxconn did not reply to Reuters' request for comment.  
    LeEco is also facing pressure from China Mobile  0941.HK  
over late payments of around 14 million yuan, a person with 
knowledge of the matter said. The carrier declined to comment. 
    In June, Taiwan's Compal Electronics Inc  2324.TW  reduced 
shipments to LeEco, and temporarily suspended its plans to buy 
shares of Leshi Zhixin, according to local media. At Compal's 
first quarter investor conference, it said it was monitoring 
Leshi's repayment abilities and would develop a new strategy to 
collect its debt, which could involve legal action. 
    Compal did not provide immediate comment when contacted by 
Reuters. LeEco did not reply to Reuters' requests for comments 
on its business partners' actions. 
    Faced with the worsening cash crunch, LeEco has put some of 
its global properties for sale, cut staff numbers, and is 
planning a restructuring to fold some business units into Leshi 
Internet.  urn:newsml:reuters.com:*:nL4N1IP25C urn:newsml:reuters.com:*:nL3N1HS06N urn:newsml:reuters.com:*:nL3N1JP3F1 
($1 = 6.7986 Chinese yuan renminbi) 
 
 (Reporting by Jess Macy Yu in TAIPEI and Shu Zhang in BEIJING; 
Additional reporting by Sijia Jiang in HONG KONG; Editing by 
Adam Jourdan and Muralikumar Anantharaman) 
 ((JessicaMacy.Yu@thomsonreuters.com; +886 2 2500-4882;)) 
 
Keywords: LEECO MANAGEMENT/