Gionee, a Chinese smartphone company, which is said to owe CNY 20.2 billion (nearly $3 billion) to 648 creditors, has reportedly filed for bankruptcy. A Shenzhen-based court has accepted Gionee’s application for liquidation bankruptcy. However, Gionee’s liquidation bankruptcy can be turned into a reorganization. Gionee had hired restructuring consultants to form a plan to reorganize the company last week.
In an interview with Securities Times, Liu Lirong, Gionee’s Chairman and Chief Executive, admitted that Gionee’s total debts amount to 17 billion yuan, with 10 billion yuan of this owed to banks, 5 billion yuan to upstream suppliers and about 2 billion to advertising agencies.
In a dramatic twist it came to light that the company’s chairman lost a vast amount of the company’s limited funds in a gambling bet. The company founder and chairman reportedly lost CNY 10 billion ($ 1.4 billion approximately) in a bet at a casino. However, other reports later indicated that Lirong had lost close to $144 billion. Responding to the reports at the time, Lirong had denied using company’s funds for personal reasons. However, later he admitted to borrowing some of the company’s funds. His lost gambling bet is what forced Gionee on the verge of bankruptcy.
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Gionee is the second company after Chinese conglomerate LeEco that shut operations in India last year after financial crisis hit it hard. Gionee, which ranked behind Apple in the sixth place for handset sales in China last year, began facing difficulties when suppliers halted component sales after failing to receive payments for several months.
Gionee which entered into a state of financial crisis last year now owes a total of CNY 20.2 billion ($3 billion approximately) to 648 creditors. The non-payment of dues reportedly forced 20 of the Chinese smartphone maker’s major suppliers to file a lawsuit against the company with the Shenzhen People’s Court.