Monday, October 20, 2014   




A little less debt for ailing Lai Sun

Dennis Eng

Monday, November 18, 2002

To many observers, last week's decision by Lai Sun Development to sell

its 32.75 per cent stake in Asia Television (ATV) to the broadcaster's

chief executive, Chan Wing-kee, for HK$360 million in cash and reports

that it had also disposed of its stake in Sunday Communications came

as no surprise as the company heaves under HK$6.19 billion of

outstanding loans at the end of September, or about 70 per cent of its

fixed assets.

Nor was it particularly surprising that the move was met by a

management indifference that has come to characterise the ailing

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property developer.

Peter Lam, Lai Sun's chairman and president, was busy playing movie

mogul with his production company, Media Asia Group, and promoting his

latest release, Infernal Affairs.

His tycoon father and the company's 89-year-old honorary chairman, Lim

Por-yen, remarked: "I don't care much about ATV and Lai Sun

Development, as it's now up to Peter to make decisions."

The source of much of Lai Sun's troubles, and the final nail in its

debt-laden coffin, stems from the almost HK$7 billion the company paid

in June 1997 for the Furama Hotel, famous for its revolving

restaurant, when it came up for sale.

At the time, the deal made sense as Lai Sun already owned the

Ritz-Carlton Hotel next door and the two plots could be combined into

a prime office location.

But then the Asian economic crisis struck, the property market

nose-dived and Lai Sun embarked on a painful and drawn-out process of

disposing of its non-core assets to repay its loans.

The fact that Lam finalised the deal without consulting his father has

been a bone of contention between the two of them ever since.

"I wish I had been informed before Peter cut the deal, then I could

have stopped it," Lim said. "An acquisition which drives debt to

dangerous levels is nothing but poor risk management."

At the time, Lim was preparing to board a flight back home from Taipei

after attending the Golden Horse film awards ceremony when agents from

Taiwan's Bureau of Investigation arrested him following accusations

that he offered NT$200 million (HK$44.94 million) in bribes to several

officials of the Taipei County Land Administration Bureau, including

its former director, Chuang Yu-kun, to persuade them to rezone land he

owned there.

The site was originally slated for farming and industrial use but,

after Lim bought it, officials allocated the land for the new National

Taipei University and he sold it back to Taipei County for more than

NT$890 million, an estimated NT$300 million above market value. Lim

denied any wrongdoing.

"I did nothing wrong. I didn't bribe Chuang, who is only an

acquaintance I met at several banquets," he said.

The court, however, found him guilty on charges of giving bribes and

laundering money through the land deals but reduced his prison

sentence of 38 months by one year.

But Lim's troubles with cash-strapped Lai Sun were far from over. The

HK$7 billion Furama purchase was partly funded by two convertible

issues for HK$265 million.

However, the downturn in the property market forced Lai Sun to take a

multibillion-dollar loss when it sold 65 per cent of its stake in the

hotel to CapitaLand for HK$1.88 billion in March 2000.

Under the deal, a joint venture called the Bayshore Development Group

was formed between Lai Sun and CapitaLand, Singapore's second-largest

developer, and financial services firm American International Group

(AIG) to construct a HK$4 billion 39-storey commercial office block on

the site. It will be named AIG Tower and is due to open in 2005.

The HK$4 billion investment includes the land premium, construction

costs and interest payments.

Although financing of HK$1.38 billion has already been arranged with

Bank of China, Lai Sun plans to sell Furama Court, a serviced

apartment project in Tsim Sha Tsui, to generate about HK$1 billion and

reduce debt.

The company also pockets HK$40 million through its various rental and

hotel businesses. Lai Sun's major assets include Causeway Bay Plaza I

and II and Cheung Sha Wan Plaza.

According to the company's director, Julius Lau, the joint venture

expects to earn more than the Furama's 2000 annual profit of about

HK$150 million.

It is hard to predict the revenue because hotel and commercial office

operations are totally different. But usually running an office

requires less operational costs, so it can turn a relatively higher

profit.

But Lim was running out of patience. Several months ago, he

effectively transferred control of Lai Sun to Lam after selling parent

company Lai Sun Garments' 42.25 per cent stake in the property

developer to his son. Following the reorganisation, Lai Sun's debt

will no longer be consolidated in the holding company's balance sheet.

Still, Lai Sun does have its upside. Since the 1990s, the company has

invested about 20 per cent of its assets into the mainland property

market.

Its first major investment was in 1995 when it developed Hong Kong

Plaza, a 1.03-million-square-foot project on Shanghai's Huaihai Road.

The company also invested in Eastern Place, a 3.24-million-square-foot

development in Guangzhou. To date, Lai Sun's mainland investments

total HK$5.5 billion and cover a gross floor area of 15 million square

feet.

Although the first phase of Hong Kong Plaza and Eastern Place have

produced a profit, not every mainland investment has turned out that

way.

In May 2002, media reports revealed that Lim's estranged socialite

daughter, Pearl, and his third wife, were being sued for HK$1 billion

over a loan for a failed residential investment in Shanghai. The loan,

co-signed by Lim, is believed to have been arranged by Hang Seng Bank

and Bank of East Asia and ballooned out of control after a renovation

spending spree by Pearl. According to reports, Lim was willing to put

in an additional HK$240 million in the hope that the two of them could

turn the investment around but Pearl instead asked her father to buy

it back for HK$1 billion. He refused and she accused him of slander.

Lim's family misfortunes also extend to his sons. Lam, his second son,

has been married twice but is better known for a string of

high-profile girlfriends that included Taiwanese actress Joey Wang and

former socialite Nancy Lin, who was reportedly paid a HK$1 million

annual salary while working at Lai Sun. His current girlfriend is

Monica, a Taiwanese model with whom he has a daughter.

Although Lam now controls Lai Sun, he has shown little interest in

running it. Instead, much of his time is spent managing the careers of

movie stars Andy Lau and Tony Leung through Media Asia Group and

tending to his Red Chamber Cigar Divan in the Pedder Building just

above Shanghai Tang.

Lim's eldest son, Lam Kin-ming, is more low-profile but hit the

headlines in 1994 when staff of a Taipei escort agency apparently

knocked him unconscious, videotaped him having sex with a man and then

blackmailed him for HK$1 million. He refused to pay, claiming that no

one would believe he was homosexual given his reputation for

womanising. The blackmailers were subsequently arrested.

Still, Lim can count on his garment empire as one of his success

stories, having earned himself the nickname of "African King" in the

1950s when he exported cheap military uniforms to African countries.

His second wife, U Po-chu, is a 50-year veteran of the garment

manufacturing business and is a non-executive director of Lai Sun

Garment while his first wife, Lai Yuen-fong, to whom he is legally and

officially married, lives a pampered but reclusive life in Beacon

Hill.

With so many mouths to feed, it is little wonder that Lim only spends

about HK$20 at McDonald's for lunch each day.

Lai Sun plunged almost 12 per cent to close at 3.7 HK cents on Friday.

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END


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