Suncity Group Starts Unwinding Subsidiaries to Lenders

Troubled junket operator Suncity Group filed with the Hong Kong Stock Exchange (HKSE) Tuesday to inform the exchange that the company had reached an agreement to sell Goal Explore Investment Limited and Boshing Investments Limited

Selling Indebted Businesses for Nominal Value

Suncity Group, which recently had its junket license suspended by the Philippine Amusement and Gaming Corporation (PAGCOR), agreed to sell both disposal groups of companies incorporated in the British Virgin Islands (BVI) for a total consideration of HK$1 ($0.13).

The price consideration was determined based on arm’s length negotiations between the parties and takes into account the net liabilities of the disposal groups, their financial performance, and future business outlook, as well as the release of the guarantees on their loans.

Goal Explore Investments, the first of the disposal groups, comprises Sky Alliance Investments and Shenzhen Sky Alliance – both engaged in investment holdings – and Dongyang Xinguang, engaged with the management of mall operations in China. Prior to the completion of the purchase, Dongyang will be transferred back to the remaining group.

Shenzhen Sky Alliance currently owes two different lenders based in China RMB300 million ($45 million) bearing an interest of 1.5% per month and due on April 30, 2022, and RMB180 million ($27 million) also bearing an interest of 1.5% per month and due on April 30, 2022.

The first loan is secured by receivables to the amount of RMB501.75 million ($75.26 million) guaranteed by Suncity Group in favor of the first lender, Beijing Huameisong Business Management Company  Limited, while the second loan is guaranteed by the group in favor of Beijing Quanzhi Legend Technology Company Limited.

The second disposal group, Boshing Investments Limited, comprises Chaohu Baosheng, an investment holding company engaged in property development in China. The subsidiary is disposed of due to the intention of the Chinese government to reclaim its land-use rights with no concrete compensation plan.

Reasons for the Sale and Expected Benefits

As Suncity failed to reach a settlement in relation to the loan receivables prior to the maturity date of the loans and the disposal group has no significant operations and a net liabilities position from last year, the group sees the disposal as an opportunity to discharge its obligations and repay the loans and interest, discharge the guarantees and achieve a gain on disposal of approximately HK$127.8 million ($16.6 million).

In relation to the material uncertainties of the group to continue ongoing concern for the next 12 months, the board of directors considers the disposal of both groups is in the interests of the company and its shareholders.

The buyer, Great Promise Developments Limited, a limited liability company incorporated in the BVI and owned by Zhong Jianhua is an independent third party holding a lender interest in one of the loans owed by the disposal groups.