A fight for the ownership of Hong Kong Airlines has been intensified by a new party claiming substantial interest in the company, as a government-imposed deadline to reveal who is in charge looms.
Unknown entity Grand City Investment Capital (GCIC) said on Tuesday night that it had taken on "substantial indirect interest" in Hong Kong's third-largest airline, and financial documents showed it had acquired the entire shareholdings of Frontier Investment Partner (FIP), which the airline's former Zhong Guosong had used to instigate a boardroom coup.
Disputing Zhong's claims of control, GCIC slammed his faction's "inappropriate" corporate and legal actions to dispute the company's ownership, which on Tuesday included attempting to serve an injunction on the airline's management team and directors.
"Their claim is without merit and their conduct, including the use of defamatory and inaccurate public statements about the airline's affairs, contradicts their stated intention to act in the best interests of the airline," said Grand City. "On the contrary, their behaviour appears to have the aim of disrupting the airline. We intend to take appropriate legal action to vigorously protect our position in response."
But as GCIC's share purchase came to light, Zhong immediately disputed the transaction between FIP and Grand City in a second injunction.
According to a writ submitted to the High Court, it was requested that Grand City be restrained from dealing or disposing of its shares while a Frontier director was demanded to not dispose of the proceeds of the sale. Grand City was also asked to disclose the transaction details including the people involved and the financial details of the process.
The first injunction on Tuesday targeted the airline's directors and leaders " including chairman Hou Wei, Wang Liya, Sun Jianfeng and Tang Kit " to prevent the company's existing management team from interfering, sabotaging, or making decisions beyond the normal business operations, unless approved by Zhong and his rival board.
It is unclear if the individuals had received their injunctions. The four had also been banned from the company's premises.
The legal move appeared to give Zhong the upper hand in asserting control. However, the revelation that Frontier's shares were sold before the date when Zhong used the stake to claim control of Hong Kong Airlines leaves more uncertainty about who is at the helm of the company.
As the government attempts to determine who was in control, the flying licence of Hong Kong's third biggest airline was at risk unless additional money is injected into the business and the corporate fight resolved.
Sources said the true owners had to prove they had the money to invest in the airline to ensure the airline's permit would not be lost.
According to financial transaction documents, Frontier's 172.5 million shares " its entire holding in Hong Kong Airlines " were sold to Grand City Investment Capital for HK$546.5 million (US$69.7 million) on April 11, before the boardroom battle pitting controlling shareholder HNA against Zhong started on April 16. Grand City was formed in February this year and it is uncertain if the sale of the shares to GCIC was legitimate.
The new evidence suggests Zhong might no longer have the majority stake needed to control Hong Kong Airlines. He owns 27 per cent of the carrier through Hong Kong Airlines Consultation Service, and Frontier holds 34 per cent. HNA has a 29 per cent share.
David Yu, adjunct professor of finance at New York University Shanghai, said: "Given the complicated shareholding structure that HNA Group companies are known for, this can create inadvertent complications in times of disagreement between the various parties, but it is strange that there is not even an agreement on the actual shareholdings or who is in control."
Zhong's representatives had yet to reply to requests for comment on the matter. HNA Group declined to comment.
The Transport and Housing Bureau said: "As the issues involved are now being handled by the court, we have nothing to add at the moment."
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