Hotel owners in debt row come up with cash

PUBLISHED : Wednesday, 06 August, 2008, 12:00am
UPDATED : Wednesday, 06 August, 2008, 12:00am

A Mong Kok budget hotel due to be auctioned to pay off an HK$86 million loan owed to the Bank of East Asia is likely to be spared, as its owner has raised another loan to settle the debt.

The Court of First Instance heard yesterday that Labour Buildings, the owner of the 108-room Tatami Hampton Hotel, and its directors had managed to raise a loan and would be able to repay the debt in a week. The hotel had been scheduled to be sold by public auction on August 20.

Mr Justice Anthony Rogers ordered the company to return on Monday to inform the court about the status of the repayment.

The court heard that the company would use the new loan to repay the bank debt of about HK$86 million plus its legal costs for litigation incurred since 1997.

It also heard the company would put up about HK$2.5 million as security to the court pending its appeal against a January judgment that transferred possession of the hotel to the bank.

The marathon dispute stems from the 1997 granting of the loan by the bank to finance construction of the 18-storey property in Changsha Street that is now the hotel.

In 1999, the loan was converted into a HK$50 million debenture. The company made some loan repayments but by March 1, 2002, the bank was still owed HK$47.14 million. There were no more payments and the debt had ballooned to HK$82.4 million by September.

In January, the bank won a ruling to recover the debt and take possession of the hotel. The hotel was taken over on June 18 after Mr Justice Rogers refused the firm's application for an order to stay the execution of the January ruling. Court bailiffs moved in on the same day and more than 100 guests were evicted from the hotel.

Labour Buildings was formerly the investment arm of Taiwan's Kuomintang.