Lai Sun Development yesterday defended its planned $503.5 million rights issue and rejected speculation that the company had financial difficulties. Executive director Julius Lau Shu-yan yesterday said that with liquidity in the financial market still low, the proposed fund-raising was aimed at improving the company's cash flow during the credit crunch. He said key shareholders - Lai Sun Garment International and the family of chairman Lim Por-yen - would underwrite the rights issue, indicating their confidence and commitment. Even if minority shareholders decided not to subscribe, the big shareholders would underwrite all rights shares and inject more than $500 million into the company, he said. Last week Lai Sun announced a proposed one-for-two rights issue of at least 535.66 million new shares at 94 cents each. The price is a 13.8 per cent discount to the average closing price of $1.09 per share over the five trading days to June 16. Some analysts estimate Lai Sun's net gearing ratio to be more than 50 per cent. Mr Lau said the company was still generating cash through property sales. Last Friday Lai Sun started the public sale of 15 houses at its luxury joint-venture Tycoon Place in Wong Yue Tan, Tai Po at $6,255 per square foot. The project has 84 houses ranging in size from 3,300 sq ft to 5,800 sq ft. Mr Lau said about seven houses in the project had been sold so far but he did not say if the sales result included units sold in the previous private sale. Mr Lau said the sale response was 'not bad', taking into account the value of the property. The three-storey houses, on sale on a first-come, first-served basis, are priced at $15 million to $23.46 million. Agents said the weakened buying sentiment and credit crunch would continue to hit sales of luxury and mass residential properties. Centaline Property Agency said secondary market home prices fell as much as 10 per cent in the first two weeks of this month.