LeEco founder Jia seeks time from creditors to clear outstanding debts

Chinese actress Gan Wei, better known as the spouse of beleaguered tycoon Jia Yueting, said on Wednesday that she would deal with the debt issues plaguing LeEco.

In a post on her Sina Weibo account, China's Twitter-like social media, Gan said that she would meet the creditors to resolve the debt problems and confirmed that Jia owed 6.9 billion yuan ($1 billion) on loans connected to pledged shares, and has paid 1.7 billion yuan towards interest on the same since 2014. She urged investors, media, government and the society to give more time and space for Jia.

Gan landed in Beijing on New Year's Eve, posting messages on her Weibo account from the airport, saying that she was back with a mission.

However, her husband had defied orders from the country's securities regulator to return to the country to take action over the mounting debts, saying he needed to stay in the United States to work on his electric car startup.

Jia said in a statement on Tuesday that he had asked his brother, Jia Yuemin, and his wife, Gan Wei, to represent him at LeEco's listed arm－Leshi Internet Information & Technology Corp－in exercising shareholder rights and handling the sale of assets.

"I feel deeply guilty and blame myself for the negative impact from the LeEco debt crisis," he said. "The fundraising for Faraday Future, the US-based electric car company, has made significant progress and there are many tasks that need to be undertaken to ensure the mass production and timely delivery of the FF 91 vehicle."

Jia also placed much of the blame for LeEco's cash-flow problems on a single late payment in July, which he said led to the freezing of his assets and triggered a cascade of early loan recalls. He also cited false and malicious reports that led to problems with creditors and suppliers.

The mounting cash problems meant the shutdown of nearly all the group's non-listed companies and the laying off of 10,000 employees. "The only thing left for the company was to sell its assets to repay the debt," Jia said.

However, LeEco's listed arm Leshi said in a filing on Tuesday that it hasn't resolved its debt problems with closely held entities associated with Jia.

"Up to now, the parties haven't come to an executable and substantial solution to its overall debt issues," Leshi said in one of several filings to the Shenzhen bourse. "The listed firm will continue to do its utmost to engage Jia Yueting and the non-listed affiliated companies to reach a resolution."

The company announced plans for a unit to buy LeEco's online business Lemall.com for 92.9 million yuan.

Shen Meng, director of boutique investment bank Chanson & Co, said though Gan's statement seemed to absolve the responsibility for Jia, she has not come up with any real solution to problem, other than seeking "sympathy from the public."

"Jia didn't come back even after the securities regulator ordered him to return, which indicates that he has been escaping the responsibility," Shen added.

Lawyers have pointed out that Jia's defiance of the CSRC's instruction may have civil, rather than criminal implications.

"Based on their marital relationship, Gan could act on behalf of Jia and deal with financial crisis and unpaid debts. The key is to handle the relationships with creditors and communicate actively with them, as well as clarify the doubts from the public," said Yan Yuejin, research director at E-house China R&D Institute.

Last week, the Beijing branch of the China Securities Regulatory Commission said in a notice that Jia must return to the country before Dec 31, 2017 to "fulfill his obligations" and protect investors' rights, saying Jia and his sister failed to provide loans to Leshi as promised.

Jia has been placed on a national list of debt defaulters after failing to comply with a court order, a move taken by Chinese courts to put pressure on people and entities to repay debts.

Information on Jia Yueting, including his name and ID number, were disclosed on the defaulter website in December after he failed to comply with a verdict by Beijing No 3 Intermediate People's Court.

Jia made his fortune at Leshi with a video-streaming service similar to Netflix, but he borrowed heavily against his shares in the company to expand into new ventures, such as smartphones and electronics.

Jia had publicly admitted that the company's expansion efforts had gone too far, which worsened LeEco's cash flow problems. Courts in some regions, including Beijing and Shanghai, have frozen his shares in the company.

In July, Jia resigned from all his positions at Leshi due to unpaid debt and financial crisis. Jia is focusing on LeEco's automobile unit and struggling to raise capital to fund a US-based electric car startup Faraday Future.

Jia recently announced that his electric car company Faraday Future has raised $1 billion to start production of electric cars. But one of the purported investors, Thailand's leading energy group, PTT, denied its involvement.

On Sina Weibo, a netizen named "Zhongyongzhidao" said that "Jia is a cheater, and he has no courage to come back. He cheated us, but now needs our trust. Why should shareholders pay bills for you?" "Please give Jia more time," said a netizen surnamed Ma on Weibo.

Fact box

? Jan 13, 2017

     LeEco received a 16.8 billion yuan investment, mostly from property developer Sunac China Holdings.

? June 26, 2017

     The Shanghai High People's Court froze assets worth 1.24 billion yuan owned by Jia and his wife Gan Wei.

? July 6, 2017

     Jia resigned from all his positions at LeEco's listed arm Leshi.

? July 27, 2017

     Leshi released a statement saying Jia's shares had been frozen.

? Dec 12, 2017

     Jia was placed on a national list of debt defaulters. He was banned from purchasing tickets for flights or high-speed trains.

? Dec 25, 2017

     The Beijing branch of the China Securities Regulatory Commission orders Jia to return to China before Dec 31.

? Jan 2, 2018

     Jia defies orders to return and stays on in the US to work on his electric car startup.