(Yicai Global) Feb. 6 -- Huang Guangyu, founder and major shareholder of Gome Retail Holdings, may raise his stake in the Chinese home appliances retailer to as much as 30 percent if a proposed debt-to-equity swap is approved, a company source said.

Huang is trying to replenish the Beijing-based firm’s cash flow through interest-free unsecured loans, the person told Yicai Global, adding that if the debt-to-equity proposal is approved, his stake would increase to between 20 percent and 30 percent.

By converting the debt into Gome shares, Huang plans to raise the combined stake that he and his affiliates own in the retailer to 25.66 percent, the company said on Jan. 18. The plan is still subject to approval by shareholders and the Hong Kong stock exchange.

Huang’s companies provided HKD780 million (USD99.4 million) of interest-free unsecured loans to Gome between December and this January.

Gome, which used to be one of the biggest electronics retail chains in China, has been on a downward spiral since Huang was jailed for insider trading and graft in 2010. With a huge store network, the firm stumbled amid stiff competition from the likes of e-commerce giants Alibaba and JD.Com, while business has been hit hard by Covid-19 outbreaks that forced stores to close and stymied deliveries.

Huang is no longer the firm’s controlling shareholder; no one is, Gome affiliate Beijing Centergate Technologies Holding said on Feb. 3.

Gome’s shares [HKG: 0493] were unchanged today at 17 Hong Kong cents (2 US cents) each after plunging as much as 4 percent in the morning.

Editor: Peter Thomas