Suncity claims Hoiana JV failed to repay loan as it reports HK$526.5m 2021 loss

The Suncity Group expects to record a loss of at least HK$526.5m (£51.1m/€61.2m/$67.3m) after a tumultuous 2021, while it also claimed that Gold Yield Enterprises has failed to repay a loan to the business related to Vietnam’s Hoiana Resort.

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The loss is a stark difference from the HK$797.5m profit recorded in 2020, despite the impact of Covid-19-related restrictions on travel during that year.

The loss comes as revenue from Suncity’s core junket business dropped from HK$123.8m in 2020 - itself a sharp decline from 2019, due to travel restrictions - to HK$42.8m in 2021. This business was then discontinued from 1 December, after the arrest of the group’s chairman, Alvin Chau.

Chau, who has since stepped down from his position at SunCity, has been accused of running an illegal online betting ring.

The largest reason for the drastic loss, however, was that in 2020 the business had made HK$1.67bn through changes in the fair value of financial derivatives, but in 2021 it made HK$965m, a decrease of HK$704m.

In addition, the business incurred HK$287.1m more in 2021 in impairment losses for its property, operating rights and equipment than it did in 2020.

Suncity’s gain on changes in fair value of its convertible bonds also drastically decreased by HK$240.2m to HK$21.3m, due to the fact that it had pushed back the maturity dates of these bonds in 2020.

Other changes included a HK$160.5m increase of the share or losses in joint ventures the business recorded and much lower gains related to the purchase of Summit Ascent Holdings for less than fair value in 2020.

In addition, the business claimed that Gold Yield Enterprises had failed to pay back a US$30m loan to Suncity. Gold Yield Enterprise is a joint venture between SunCity’s Star Admiral subsidiary and Alpha Era, an investment trust.

At the time of the loan, SunCity said Star Admiral and Alpha Era together owned a 67% stake in the Hoiana Resort in Vietnam.

SunCity and Alpha Era had lent Gold Yield this money last year in order to develop Hoiana. Suncity claims the loan was payable on 28 February, but that it has not been repaid. As a result, it says that Gold Yield Enterprise has defaulted on a US$34.9m debt to SunCity, when interest is included. It added that it would owe the same amount to Alpha Era.

“The company and Alpha Era will closely monitor the subsequent development and the status of the Loan and the loan by Alpha Era owed by GYE,” Suncity said. “Further announcement will be made by the company as and when appropriate in accordance with the listing rules or otherwise.”

Suncity had itself been the subject of loan default claims following Chau’s arrest, as an unnamed lender argued Chau had defaulted on a HK$313.6m debt. As a result, Suncity warned that the business could be seized by creditors.