Sunac sets aside US$2.64b to cover losses in Leshi, conceding its recovery strategy has ‘failed’
‘How can I cut off an arm, when the head is already off?’, asked Sunac’s chairman Sun Hongbin, responding to a question on whether he will continue to seek cost cuts in the ill-fated investment
Sunac China Holdings, mainland China’s fourth largest developer, has admitted that its investment in troubled video streaming platform Leshi was a failure and represented its biggest loss since listing in Hong Kong in 2010.
Sunac has now written off most of its investment in Leshi Internet Information and Technology, setting aside 16.6 billion yuan (US$2.64 billion) to cover its losses.
That breaks down into 9.98 billion yuan to write down debt, impaired loans valued at 2.1 billion yuan and 4.48 billion yuan in investment losses, the Tianjin-based company said during the announcement of its 2017 financial results.
“How can I cut off an arm, when the head is already off,” said Sunac’s chairman founder Sun Hongbin, responding to a question whether he will continue to seek cost cuts in the ill-fated investment.
Combined with other investments and loan guarantees, it is estimated to have invested 18.6 billion yuan in Leshi-related businesses.
Sunac actually invested in three companies under the LeEco umbrella: Leshi Internet Information and Technology, New Leshi Zhijia, which manufactures TV sets and in which it has a 33.5 per cent stake, and Le Vision Pictures, a film production company, 40.75 per cent of which it owns.
