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Naomi Rovnick

Mohammed VI, the King of Morocco, is among the private investors embroiled in the bitter financial restructuring of former Macau legislator David Chow Kam-fai's Macau Legend business, according to three sources with knowledge of the situation.
David Ross, a co-founder of Britain's largest mobile-telephone retailer, Carphone Warehouse, is another of about 20 wealthy private individuals who, along with a group of hedge funds, were sold a US$400 million stake in Macau Legend by investment bank Merrill Lynch in 2006.
The investors had anticipated a quick-flip profit when the Fisherman's Wharf theme park, partly owned by Macau Legend, joined the Hong Kong stock exchange. However, the share sale, set for earlier this year, never happened. 
The investors have tried and failed to agree a compensation deal with Chow and are now arguing about what to do next.
Last week, most of the 26 preference shareholders spent four hours on a conference call about future strategy without coming to any agreement, two people with knowledge of the call said.
'It is becoming silly,' one of them said. 'Some investors want to take legal action [against Chow], others believe this is impossible and others just want to get out fast.'
The restructuring row has been rumbling for almost a year. In April, Chow offered to buy his preference shareholders out of Macau Legend for US$200 million, but he missed a June deadline to pay the money. He returned to his investors last month with an offer of just US$100 million, which was rejected.
King Mohammed and Ross' personal views are unknown, as they could not be reached, but their involvement illustrates just how widely the Hong Kong arms of investment banks marketed the pre-initial public offering stakes in Chinese companies in the heady days of 2006-07.
Many banks sold their wealthiest individual clients stakes in privately held mainland firms along with the expectation they would reap quick profits when the companies floated on the Hong Kong stock exchange at higher valuations. 
The Macau Legend deal has been stymied by the poor performance of the Fisherman's Wharf, whose giant, man-made volcano is often the first sight visitors arriving from Hong Kong by ferry see of Macau.  
The Wharf, which is half-owned by Macau Legend and half by Stanley Ho Hung-sun, had lost money since it opened in 2005, four sources with knowledge of the company's finances said. Businesses must be profitable for three years before they can join the Hong Kong market.
According to sources familiar with the discussions, a few preference shareholders believe they now have a legal right to wrest Macau Legend's stake in the theme park from Chow. Others do not want the theme park but want control of the Wharf's Babylon casino.
Some of the investors believe they are entitled to the Wharf or the Babylon because of the convoluted pre-listing agreement they struck with Chow. Under the contract, the preference shareholders were set to buy Macau Legend's half-stake in the Wharf for a multiple of 10 times earnings before interest and tax on December 31 last year. 
They would then sell the half-stake to the public in the planned share offering.
Some of Macau Legend's preference shareholders reckon the investor group can now seize control of the Wharf for free. 
'They paid US$400 million and got nothing back. If a deal is struck to buy something on an earnings multiple and there are no earnings, then you can pay zero,' one of the sources with knowledge of the talks said.
The health of Ho, who is in hospital recovering from brain surgery, was also a big issue, two of the sources said.
It will be impossible for the investors to negotiate taking Macau Legend's share of the Wharf or the Babylon without agreement from Ho or his as yet unknown successor. SJM Holdings, which is majority-owned by Ho's family, manages the Babylon.
Ross has already been burned by the economic downturn. He resigned from Carphone in December last year after he broke London Stock Exchange rules by mortgaging his stake in the mobile-telephone retailer and two other British-listed firms as collateral for personal loans without telling the companies' boards.
Ross reportedly raised about GBP200 million (HK$2.53 billion) from the loans to support his loss-making property investments.
Less is known about King Mohammed's personal finances, but operating profits at ONA, the Moroccan conglomerate controlled by the royal family, slid 8.8 per cent to 1.15 billion dirhams (HK$1.18 billion) in the six months to July.
ONA, Macau Legend and Merrill did not respond to e-mails requesting comment, but an associate of Chow's said the Macau tycoon was 'not in the wrong'. According to that person, Chow did not think Merrill had sold the preference shareholders a pre-flotation deal. 
'He thought he was getting long-term partners who would stay with him for years to help him develop his business,' Chow's associate said. 'But the hedge funds and private investors thought they were getting a quick flip. It was a badly put-together deal.'
Huge bet
Private investors and hedge funds took a stake in Macau Legend for, in US$: $400m



King among investors in troubled Macau Legend