(Yicai Global) Nov. 4 -- A number of insiders close to Gome Holdings Group told Yicai Global that the struggling home appliance retailer would delay salary payment, not stop it.

Gome only informed its staff about the possibility of delayed salary payment in the next six months, an insider told Yicai Global in response to media reports claiming the Beijing-based companies made employees sign letters of commitment with a clause in which they acknowledged that the payment of salaries for the next six months to 12 months would likely be delayed.

‘Gome stopped paying employees salaries’ became a hot topic on Chinese social media late yesterday after the reports were published.

Gome’s workers will receive salaries for September after the Double Eleven shopping festival and may as well get November’s pay on schedule, according to an industry professional.

Most private Chinese firms, especially those involved in the retail business with physical stores, are facing intense cash flow pressure, the insider noted.

Gome’s listed unit Gome Retail Holdings said in a filing to the Hong Kong Exchange and Clearings that it expects net loss to widen between 35 percent and 65 percent this year from 2021.

Sales in the first three quarters likely plunged 55 percent to 60 percent from a year earlier, Gome Retail noted, adding that lower sales income resulted in overdue loans. The firm missed a loan payment of about CNY3 billion (USD414 million) at the end of September and is now in talks with related financial institutions to extend the deadline, it said.

Gome Retail has only CNY2.4 billion cash on account, while it owed as much as CNY58.6 billion (USD8.1 billion) as of the end of June, of which CNY22.9 billion are loans due this year. Its cash flow from operations was CNY55.4 million (USD7.6 million) in the first half, sinking from CNY2.1 billion a year before.

But other insiders close to Gome told Yicai Global that the company is about to raise CNY10 billion from Xiamen C&D Group, a Chinese firm mainly engaged in property development, supply chain operation, tourism exhibition, medical health, and industrial investment.

Gome and C&D already signed a deal at the beginning of the week, but the funding amount is still unknown, one of the insiders noted. Xiamen, Fujian province-based C&D reported an annual revenue of over CNY700 billion (USD96.6 billion) last year.

Shares of Gome Retail [HKG: 0493] closed 1.6 percent up at 13 Hong Kond dollar cents (0.2 US cents) today. The stock has plunged 80 percent since January. Huang Guangyu and his wife, the founders of Gome, have cashed in their holdings several times this year.

Editor: Futura Costaglione