(Yicai Global) Jan. 19 -- The founder of Gome Retail Holdings has managed to boost his holdings in the struggling Chinese home appliances retailer by 16.7 percent, after paring his stake drastically last year to raise cash, by changing some of the debt he is owed by the firm back into equity and consolidate his position as top shareholder.

Shinning Crown Holdings and Gome Management, which are both owned by Huang Guangyu, will convert HKD780 million (USD99.7 million) in interest-free loans into a 16.7 percent share of the company, the Beijing-based firm said yesterday. This will boost Huang’s shareholding to 25.7 percent from 10.8 percent.

Gome, which used to be one of the biggest electronics retail chains in the country, has been on a downward spiral since Huang was jailed for insider trading and graft in 2010. With a huge bricks-and-mortar sales network, the firm stumbled amid stiff competition from the likes of e-commerce giants Alibaba Group Holding and JD.com, and business has also been hard hit by coronavirus outbreaks that shuttered stores and upended deliveries of online orders.

Gome, which had defaulted on CNY3 billion (USD443 million) of debt as of the end of September last year, is expecting its losses to widen as much as 65 percent last year from the previous year, it said last September.

In a bid to turn the company around, Huang, who was released in February 2021, cut his holdings several times last year, slashing his stake to 28 percent in early December from 61 percent at the end of 2021. He then used the cash raised to provide the firm with interest-free loans. Now he is converting these loans back into shares in the company.

In this way, Gome can save its cash for other purposes and at the same time settle some of its debts, and Huang can remain majority shareholder, a source close to the company told Yicai Global.

But the company continues to be dogged by setbacks. On Dec. 29, Gome said a group of suppliers had filed bankruptcy petitions against unit Gome Appliances, claiming the subsidiary owes them CNY4.7 million (USD693,000). The case has yet to be accepted by the court.

Editors: Dou Shicong, Kim Taylor