LAI Sun Development faces liabilities of $3.5 billion following the purchase of the Ritz Carlton hotel, but the firm is to sell Hongkong properties to reduce its gearing, according to director Mr Billy Hung Hing-chuen. He said the company's financial position would look rosier by next year, and total liability would be reduced to $500 million by the end of 1994. ''At the moment the financial position of the company seems a little bit low, but the liability would be reduced by more than $1 billion at least next year,'' said Mr Hung. Based on the $1.2 billion purchase price of the Ritz Carlton hotel, the company will have to pay $720 million for its 60 per cent stake. Mr Hung said the company was on the verge of signing for a $500 million loan with Hongkong Bank. There are four other companies involved, each of whom have taken a 10 per cent stake in the hotel. The companies are Kwong Sang Hong, Chi Cheung Investment, Kailey Enterprise and Wing Tai Group. Mr Hung said Lai Sun had no intention of selling more of the stake to other parties at the moment. Although a rights issue could be one way to reduce the debt, Mr Hung stressed this would not be appropriate at this time, because earnings per share would be diluted with the conversion of the Lai Sun Development 94 warrants next year. He said the company looked upon the Ritz Carlton as an investment property, and had no intention of transferring ownership to its hotel subsidiary, Glynhill International, or of redeveloping the hotel. Currently, the company's bank borrowings stand at $1.2 billion. The preference shares, due for redemption in July 1994, will require another cash outlay of $1.2 billion. In addition, Mr Hung said, China operations and investment would cost about $400 million this year. In other words, the company has to repay $3.5 billion in the next 12 to 14 months. Based on market estimates, Lai Sun will register $400 million to $500 million profit this year, and $1 billion in 1994. Mr Hung said that, assuming the warrants are fully converted, there would be a $1.5 billion cash inflow by the end of the 1994 financial year. Profits in 1993 and 1994 will be guaranteed by the sale of the Repulse Bay Road project, Peace Garden in Homantin, and the Hung Shui Kui residential project in Yuen Long, and the rental income derived from these properties, said Mr Hung.