(Yicai Global) Aug. 22 -- Embattled Jia Yueting's previous internet endeavor Leshi Internet Information & Technology's stock has gained on the news that the firm has come up with a solution to pay its debt.
Leshi and its unlisted arm have liabilities worth a total of CNY6.7 billion (USD978.9 million), most of which they will settle via credit assignment and disposal of assets, the Beijing-based parent said in a statement yesterday, adding that the unlisted unit's affiliates have not confirmed the plan yet.
The parent company's [SHE:300104] share price soared 10 percent for two consecutive days and closed at CNY2.52 (USD0.37) today.
The payment scheme means that Leshi may lose its status as the controlling shareholder of smart TV unit Lerong Zhixin. The subsidiary will offset debts with a share transfer worth CNY1.37 billion. Leshi Holdings will also pledge 10 percent of its shareholding of Lerong Zhixin as collateral and pay approximately CNY1.1 billion to cover the principal and interest of a loan that China Minsheng Trust granted to the TV unit.
Leshi E-Commerce will transfer CNY170 million (USD24.8 million) of debt associated with ride-hailing platform Yidao Yongche's affiliates to the listed company and sign a credit assignment agreement.
Leshi has previously issued several warnings of a possible suspension of share trading, a market insider told Yicai Global, adding that the settlement plan is far too inadequate to cover all the overdue payments owed by the unlisted entities to the parent, and that the execution of the plan still faces uncertainty.
Despite the fact that Jia Yueting's new venture, electric vehicle startup Faraday Future, has secured CNY20 billion in funding from two real estate developers Evergrade Group and Sunac China, the money has not sparked any major progress in the debt payment front.
"Whoever dug the hole should fill it himself," Deloitte's financial advisory partner Chen Jizheng said. "Jia Yueting landed a big funding deal with the carmaking business, and there appears to be some kind of 'pocket agreement' (an agreement signed in the dark that involves harsh conditions) behind the scene. Leshi still hopes that Jia can use some of the money to settle the debts."
Editor: Emmi Laine