China court freezes tech firms assets

A Chinese court has frozen millions of dollars in assets belonging to tech conglomerate LeEco, dealing another blow to the group as it struggles to stay afloat, according to a global media report Wednesday.

The assets were frozen because of missed interest payments on a loan taken out by LeEco’s mobile phone subsidiary, the company added.

An order issued by the court backed up a request by China Merchants Bank to freeze Rmb1.24 billion ($180 million) of assets from three LeEco subsidiaries as well as the personal assets of LeEco founder Jia Yueting and his wife Gan Wei, LeEco confirmed.

LeEco’s founder once painted his company as rivalling western tech groups such as Tesla. Since its founding in 2004, the company has moved away from its core streaming business to sectors as varied as electric vehicles and mobile phones.

Last November, Mr Jia acknowledged in an open letter that the rapid expansion had left the company vulnerable, burning cash at an unsustainable rate.

Freezing assets is often a precursor to bankruptcy proceedings, and the court order might trigger a cascade of similar requests from other LeEco creditors. Chinese law mandates that creditors seeking claims against assets must file in the jurisdiction where the assets are. This often leads to a pile-on of claims in the same courts in the same market in which the company holds its most valuable assets.

Lenders’ claims are also considered in the order in which they were filed, putting pressure on creditors to file ahead of other institutions, say analysts.

– SZ