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Banking & Finance

Hong Kong unit of LeEco files for liquidation

Latest sign of trouble for Chinese electronics conglomerate

LeEco's co-founder Jia Yueting is placed on China's official blacklist for debt defaulters.   © Reuters

HONG KONG -- Chinese tech conglomerate LeEco's dream of global dominance hit a wall on Thursday, as it applied to wind up its Hong Kong subsidiary in the latest sign of its mounting financial troubles.

The petition comes one week after the group's controlling stakeholder and co-founder Jia Yueting was placed on China's official blacklist for debt defaulters after a series of defaults and lawsuits from creditors following rapid expansion.

Le Corp., a unit tasked with overseeing the group's Asia-Pacific expansion, submitted an application for self-liquidation to the Hong Kong High Court, according to court records. A hearing is scheduled on Feb. 21.

The troubled company was set up in August 2014 as the Chinese conglomerate's offshore regional headquarters, according to its official website. LeEco's customer service hotline in Hong Kong has been suspended and phone calls to its Hong Kong office were not answered.

Former staff told Nikkei Asian Review that most of its 500 employees in Hong Kong had left the company by the end of July, and only a few remained to wind up the business.

Management at the Hong Kong unit had discussed filing a liquidation petition at internal meetings as early as May, a former employee said.

Besides Hong Kong, the branch also oversees the group's India operation, which has "nearly shut down" according to a former LeEco India employee, who did not want to be named.

The Chinese tech company made a high-profile debut in the Indian market last year, announcing several partnerships with local players for content and vowing to open a research and development center in Bengalore with 1,000 employees.

In just a year, Jia's ambition fell apart. A former LeEco India employee said only two to three people in the finance department remained in the company to close up accounts.

However, LeEco's Hong Kong-based sports streaming arm LeSports, which screens international events such as English Premier League and NBA games, said its operation will not be affected by events at its sister company.

"LeSports HK and Le Corporation Limited are two totally different entities ... Its application for liquidation has nothing to do with LeSports HK, and has no impact to our business," LeSports HK said in a statement posted on its Facebook page.

Jia's LeEco has emerged as one of China's most prominent tech companies by aggressive expansion from streaming online videos on to TV sets, smartphones and electronic cars that claimed to rival those of U.S. giant Tesla.

LeEco's Le Pro3 phone is on display during a press event in San Francisco.   © Reuters

However, LeEco's expansion backfired last year when Jia admitted that the company was battling a cash crunch. That was followed by negative news reports of the departure of several of its executives, multiple lawsuits from creditors and substantial job cuts globally.

Most recently, Jia's name and identification number was posted on a defaulter website set up by China's Supreme People's Court after his company failed to pay Ping An Securities amounts due of more than 470 million yuan ($71.4 million). People on the blacklist can be barred from travelling, taking up senior positions in companies and applying for credit cards.

Interventions by Sun Hongbin, chairman of property developer Sunac China and a fellow Shanxi Province entrepreneur, have failed to turnaround  the company. Sun poured 15 billion yuan into LeEco subsidiaries in return for equity stakes in January, and later provided 1.8 billion yuan in fresh loans to its video streaming and TV unit.

"I've never had any regrets my entire life, until I invested in LeEco," Sun said during a Hong Kong press conference in September, according to South China Morning Post, though Sun still vowed to turnaround the troubled company at that time.

A spokesperson in Sunac's Tianjin headquarters said it had no comment on Le Corp.'s application for liquidation.

Leshi Internet Information & Technology, the listed unit of LeEco, swung to a net loss of 1.02 billion yuan in the third quarter from a profit in the year earlier period.

Despite his business woes back home, Jia is working hard to become China's Elon Musk -- on the other side of the Pacific.

On Dec. 13, the controversy tycoon said at an employee meeting in Los Angeles that he had successfully raised $1 billion for Faraday Future, an electronic vehicle startup he co-founded, according to media reports. Despite being barred from taking up key executive positions and stepping down from his own company in China, Jia said he would take over the role of CEO at the U.S. company.

Nikkei staff writer Kiran Sharma in New Delhi contributed to this report.

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