A court in Shanghai has frozen $182 million in assets tied to the chairman of the Chinese technology company LeEco after one of its affiliates missed loan payments.
The ruling last week by the Shanghai High People’s Court was the latest setback for the chairman, Jia Yueting, and for LeEco, which has piled on debt in recent years to fuel its ambitious expansion.
A company spokesman confirmed that the court had frozen assets connected to a loan for LeEco’s mobile phone business, Le Mobile, but said collateral was enough to cover the debt. Nie Chengzhi, LeEco’s vice president for finance, said the company would work with China Merchants Bank on repayment. In a statement, the bank said it had taken legal action after many attempts to recover interest owed.
The frozen assets belonged to Mr. Jia, his wife, and three LeEco affiliates, the state news agency Xinhua reported, citing court documents.
It is a personal blow for Mr. Jia, one of China’s most outspoken technology figures, who in recent years had pledged to challenge American giants like Apple and Tesla. His ambitions propelled LeEco from its start in internet video into a dizzying array of new businesses, including online wine delivery and electric cars. Mr. Jia remains the primary shareholder of Faraday Future, a troubled Los Angeles-based electric car venture with 1,400 employees.
All that investment required heavy borrowing. Since the start of 2016, LeEco brought in at least $6 billion in financing from investors big and small, but it saw little in the way of a payoff.
Mr. Jia first admitted the cash crunch last autumn. Last week, at a shareholder meeting of LeEco’s main publicly listed arm, Leshi Internet, he acknowledged that the company had made mistakes in allocating funds.
“The cash problems at the nonpublicly traded businesses are more serious than when this crisis erupted,” Mr. Jia told investors, according to a transcript. “Our businesses are constantly using cash to repay loans, having a huge impact on their operations.”
At the meeting, Mr. Jia indicated that LeEco was having difficulty securing additional loans. As of Leshi Internet’s most recent filing, Mr. Jia had pledged 97 percent of his shares in the company to back loans that as of November totaled $1.7 billion.
LeEco has also started selling assets to raise cash. Last week, its ride-sharing affiliate, Yidao Yongche, announced a change in control, without naming the new controlling shareholder. The company had for months delayed paying many of its drivers.
And creditors are showing up in person in Beijing, asking LeEco to pay up.
Last week, Zhang Jun, a supplier for Le Mobile, joined other small suppliers for a seven-day sit-in in LeEco’s Beijing lobby, she said, but left with no money.
“I don’t have any hope anymore,” she said, noting that a civil suit she had filed against LeEco in Beijing courts was unlikely to produce a result until the end of the year. “By then there probably won’t be any money left for us.”
The overdue loan to China Merchants Bank financed LeEco’s 2015 purchase of an 18 percent stake in the Hong Kong-listed Coolpad Group, the business weekly Caixin reported. Coolpad’s share price has dropped this year as competition in the smartphone market has eroded its position. Hong Kong corporate records show the $324 million loan was backed by all the acquired shares of Coolpad, in addition to collateral in mainland China.
The New York Times