After a long absence, Sun Hongbin’s statement on LeTV.net led to the concern of the Shenzhen Stock Exchange regarding LeTV's bankruptcy and its sustainability, and issued an inquiry letter to the latter on the evening of March 30th. The focus naturally focuses on the issue of impairment losses on company assets, and whether there is genuine insolvency.
On the evening of April 3rd, LeTV.com responded to this inquiry letter. In the response letter, LeTV.com clearly stated that as of December 31, 2017, the company did not trigger a negative net asset, but it also stressed that If the company continues to suffer large losses in 2018, there is a risk of insolvency.
Regarding the 2017 annual impairment loss of assets, LeTV.com stated that, as of now, the on-site work of the audit project has basically ended, and the internal quality control audit of audit institutions has been submitted. As the company's annual audit involves multiple business entities, there are many types of business audits. Personnel need time for verification, analysis, and collation. At present, no audit conclusion has been formed. However, LeTV also stated that the final audit results may differ from the performance data previously disclosed at the end of February.
At present, LeTV's book balance of accounts receivable as at the end of last year was 7.181 billion yuan, of which more than six were within one year of aging. The book balance of related party accounts receivable during the same period was 4.726 billion yuan, accounting for the total amount of accounts receivable. The proportion reached 65.81%. Based on this, LeTV.com stated that the corresponding receivables amounted to 5.242 billion yuan, and the provision for repayment was 3.617 billion yuan, and the accrual ratio was 69%.
Previously, LeTV Holdings has continuously transferred the equity of Lepa Marketing Services (Beijing) Co., Ltd. and other companies to LeTV.com and repaid some of the related accounts, but it is only a small amount of money for LeTV.com's huge amount of related accounts. '.
LeTV.com stated that the precondition for making this accrual is to take into account the fact that most non-listed systems (ie LeEco Holdings) are insolvent and do not have the basic solvency decision.
In addition to making provision for impairment, LeTV also disclosed the company's borrowing liabilities as of the end of last year.
Statistics show that as of the end of 2017, LeTV.com's total borrowings for borrowing amounted to RMB 9.288 billion, of which the highest percentage was for financial institutions borrowings, which was RMB 3.755 billion; followed by the priority partner liability for M&A funds, which amounted to RMB 3.349 billion. The third largest amount of money was borrowed by non-financial institutions, with 1.79 billion yuan.
LeTV.com stated that by the end of 2017, the company’s operating liabilities amounted to 7.105 billion yuan, and it is currently expected that some of the liabilities will be overdue and the repayment will be difficult.
At the same time, there are 5.619 billion yuan of debts due to Lease.com's 2018 financing loans that are about to expire. The company has a relatively large debt repayment risk.
To solve this problem, LeTV said that the board of directors and management of the company have initially formed four solutions, including:
(1) Improve business operations to restore the company's cash flow and supply and marketing system;
(2) actively negotiate loan extensions with relevant financial institutions and renew loans;
(3) Seek a third-party capital increase to resolve the financial pressure currently being faced by the subsidiary;
(4) Coordinating related parties to repay the listed company's arrears in the form of cash or assets;
'In addition to the above measures, the company's management is actively seeking all possible options, but at present no substantive program has been formed.' LeTV said.
It is worth noting that in the reply letter, LeTV also disclosed several details, including questions relating to LeTV.
LeTV.com stated that since the second half of 2017, due to the deteriorating operating conditions of LeTV's mobile phone business, LeTV was already in the production phase. Mobile phone R&D projects are no longer expected to bring any economic benefits to the company.
In addition, due to the company's strategic adjustments, the current unfinished car networking, VR and other projects whose actual R&D results do not have practical value to the company's future business development have been suspended in the second half of 2017.