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1. Hang Lung wins $1b hotel battle with Sino

2. Rail firms linked to search for extra $10b

1. Hang Lung wins $1b hotel battle with Sino
David Hilton, The Standard 3 August 2004

Hang Lung Group has won a six-year legal fight to get rival Sino Land to pay for a HK$1.07 billion hotel it had agreed to buy.

Justice Michael Burrell said on Monday Sino Land had reneged because the purchase had ``become a bad deal commercially'' in the wake of the 1997 property crash.

After a High Court contest lasting 64 days, with 16 lawyers on both sides and a procession of expert witnesses, Sino Land was ordered to pay Hang Lung the balance of HK$749 million for the 438-room Tsuen Wan hotel, now converted into the Bay Bridge serviced apartments.

Sino Land, through its then subsidiary, Mariner International Hotels, had already paid a HK$321 million deposit and part payment when it agreed in 1996 to purchase the building still under construction. But on completion in June 1998, Mariner refused to pay the balance of the earlier agreed HK$1.07 billion.

The purchasing company cited what it claimed were poor construction standards and builder's lack of good title to the property. Hang Lung said the real reason was because of the 1997 property crash.

Hang Lung sued Sino Land for full payment and Sino Land sued Hang Lung for the return of its HK$321 million part payment.

Both sides summoned a succession of experts to support claims that the disputed property was or was not of the standard Sino Land expected to pay for. But Justice Burrell concluded in his judgment: ``The ultimate effect of the findings made is that good title did exist at the time of the completion date.''

It was in December 1996 that Mariner agreed to pay Hang Lung's subsidiary, Atlas Ltd, HK$1.07 billion for the hotel which Atlas was then building on the Yau Kom Tau site. But on the completion date in June 1998, Mariner refused to pay up. The property was then worth about half what Mariner had agreed to pay for.

Mariner and Atlas had agreed as a benchmark the standard of Hang Lung's Grand Plaza Hotel at Kornhill. The judge said Robert Ng, who ``made the decisions at Sino'', visited Grand Plaza Hotel only briefly before deciding to purchase the Tsuen Wan development and concluded that ``movements of the property market would be uppermost in his mind at all times''.

About half way through the trial, the parties agreed to a winner-takes-all battle, limiting the arguments to a single question of overall liability, namely whether it was Sino or Hang Lung which had repudiated the December 1996 agreement. Justice Burrell said: ``This reduced the size of the litigation from monstrous down to very substantial.''

Justice Burrell said: ``Fundamental to Sino Land's case is that Hang Lung failed to deliver a hotel. Sino's case is that it was to be a fully functional full-service hotel. They submit that they got, at worst, a block of serviced apartments. In my judgment, as a matter of construction, this submission has not been made.''

He added: ``The simple analysis is that if Sino Land wins, it will be because Hang Lung failed to deliver under the contract. If Hang Lung wins, it will be because Sino Land failed to lawfully extract themselves from what had become a bad deal commercially.''

2. Rail firms linked to search for extra $10b
Raymond Wang, The Standard 3 August 2004

MTR Corp and Kowloon-Canton Railway Corporation, which aim to hammer out final details of their planned merger by month's end, are reportedly seeking a combined HK$10 billion in financing.

KCRC wants to arrange HK$5 billion in funding through a five-year revolving credit line and seven- and 10-year term loans, according to the debt market newsletter basispoint.

The company asked about 20 banks to submit preliminary proposals by last week.

The proceeds are said to be for general working capital, though some of the money may be used to build KCRC's planned Sha Tin to Central link, the newsletter said.

MTRC is also seeking several loans that bankers said could total at least HK$5 billion.

Neither MTRC nor KCRC was available for comment yesterday.

Shares of MTRC fell 0.43 per cent to end Monday at HK$11.65 ahead of today's announcement of its interim results.

Analysts said the railway operator will likely report a jump in earnings for the half-year ended June 30, as property prices and its rail operations recovered from the economic slump.

The forecasts range from JPMorgan's HK$708 million to HK$1 billion by UBS. The company posted net profit of HK$113 million a year ago.