Leshi Seeks Third-Party Funding Amid Operating Difficulties
Liao Shumin
DATE:  Mar 28 2018
/ SOURCE:  Yicai
Leshi Seeks Third-Party Funding Amid Operating Difficulties   Leshi Seeks Third-Party Funding Amid Operating Difficulties

(Yicai Global) March 28 -- Cash-strapped Leshi Internet Information and Technology Corp. says it is working hard to overcome operating difficulties and will seek out third-party funding.

The Guangzhou-based firm is exerting efforts to restore cash flow and has held talks with financial institutions regarding loan renewals, while also seeking third-party funding, the company said in a statement in response to former chairman Sun Hongbin's recommendation that the firm enters bankruptcy.

Sun Hongbin proposed the winding-up of Leshi in his first interview since stepping down as chairman on March 15, adding that bankruptcy would be a better option than delisting or asset-stripping.

Leshi and its array of affiliates have been struggling to make ends meet since last year. The company forecast a 2017 loss of USD1.8 billion on Jan. 31, the biggest for a private A-share company in over a decade. Jia resigned as chairman of the listed company in July and fled to the US, with Sun Hongbin, chairman of property developer and major investor Sunac China Holdings Ltd., taking over until his departure two weeks ago.

The company continues to experience a cash crunch and liquidity remains very tight, the statement said, adding that management is seeking all possible solutions but is yet to draw up a specific plan.

Sunac China Holdings Ltd. holds about an eight-percent stake in Leshi and is its second-largest shareholder. However, Leshi's business operations failed to improve substantially after Sun pumped tens of billions of yuan into the company in a little over 12 months.

Sun contends that the first possible solution to Leshi's woes, bankruptcy and restructuring, would not affect its listing and is a mature solution, but needs support from regulators, the Beijing government, and a court. The second is to sell assets to pay off debts and maintain the listing status. However, Leshi has no assets left to sell. If it continues at a loss, delisting may still be the result. The third solution is simply delisting. Sun does not want to see this, but it is beyond his control and ChiNext's delisting rules will determine this. Leshi's current condition makes it very likely that its net assets are negative, which produces a high likelihood of delisting.

Leshi responded, saying that Sun's comments were purely his own speculation, using his knowledge of the firm's business and financial conditions, as a shareholder. His comments do not mean that Leshi already has substantive plans and intentions, the company added.

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Keywords:   Leshi