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There has been a huge uproar in the Hong Kong real estate industry recently, as the family of the late "shop king" Deng Chengbo was involved in a debt dispute worth tens of millions. This newspaper has exclusively obtained judicial documents, combined with real estate registration records and in-depth interviews with the industry, to fully reconstruct for readers this financial storm involving three generations of business empires.
At the heart of the storm: a debt collection order worth tens of millions triggered by a piece of guarantee
The District Court case No. DCCJ 4136/2024 kicked off with the formal filing of the lawsuit by Hui Cui International Group Co., Ltd. in January 2024 to recover the proceeds of the lawsuit from Qian Bei Shao Co., Ltd. and its guarantors.Deng ChengboThe estate administrator owes a total of 1.14 million. This loan of 3.5 million, which began in August 2020, eventually turned into a financial crisis affecting Hong Kong's core business district after experiencing the impact of the epidemic and the storm of interest rate hikes.
According to the guarantee documents, Deng Chengbo signed an unlimited liability guarantee in his personal name before his death, the terms of which stated that "the guarantor shall bear joint and several liability for the principal, interest and related legal fees." Authoritative sources in the legal field analyzed that although such clauses are common in the Hong Kong business community, upon the death of the principal guarantor, they will trigger the special recovery procedure under Section 62 of the Estate Administration Ordinance.
Debt Timeline Decoded
August 24, 2020:
- Qianbeishao signed a "3+2" flexible repayment agreement with Huicui International, with an interest rate of 9.5% in the first year, which can be adjusted according to market conditions afterwards
- Deng Chengbo went to the law firm in Central to sign the guarantee documents
- The purpose of the loan should be stated as "business expansion and working capital"
Q3 2022:
- Hong Kong follows the United States in starting an interest rate hike cycle, with the prime rate exceeding 6%
- Qianbeishao began to experience delays in interest payments
August 2023:
- The accumulated arrears of principal and interest amounted to RMB 2.83 million
- The creditors initiated the first round of negotiations and proposed a "debt-equity swap" plan
January 4, 2024:
- Mortgage registration completed for Room P, 15/F, Sunrise Centre, Kwun Tong
- The property was sold for $2.7 million, a discount of $42% from the 2020 valuation.
The calculation behind mortgaged property
Our newspaper's on-site investigation found that the property in question is located in the industrial and trade zone undergoing transformation in Kwun Tong, with a usable area of approximately 1,200 square feet. The real estate agent revealed that the building has benefited from the "Start Kowloon East" plan in recent years, but the vacancy rate remained at 18% after the epidemic. It is worth noting that the phenomenon of "double discount" occurs in the process of disposing of mortgaged properties:
- Valuation discount: CBRE's 2020 valuation report shows the unit is worth $4.65 million
- Urgent sale discount: The transaction price in 2024 is only 2.7 million, which is 15% lower than the market price
"This precipitous depreciation reflects the structural changes in the commercial property market, especially under the impact of new office models, the liquidity of traditional industrial buildings has been greatly reduced," said JLL analyst Minghan Li.
The Deng family's asset map is shaken
This newspaper has compiled records from the Land Registry and found that the Deng family has disposed of at least 23 properties since 2022, with a total value of more than HK$3.8 billion. Among the most notable transactions were:
- G/F, Queen's Road East, Wan Chai:
- Purchase price in 2018: 550 million
- 2023 transaction price: 148 million
- Book loss: 73% (actual loss after deducting holding costs may reach 81%)
- The whole commercial building on Carnarvon Road, Tsim Sha Tsui:
- 2021 valuation: 1.2 billion
- Mortgage financing in 2023: 480 million
- Loan-to-Value ratio: 40%, much lower than the industry average of 65%
Wang Yaobang, the family's financial advisor, revealed: "The decision-makers have implemented the 'cash is king' strategy since 2021, but the speed of asset realization has not kept up with the interest accumulation. The disposal of some properties requires the consensus of multiple family members, delaying the best time to sell."
Key Offense and Defense in Legal Battles
Lawyer Chen Dawen, who is familiar with estate handling, explained that the special features of this case are:
- Will the guarantee liability be extinguished along with the heirs?
- The legal status of the estate administrator before the distribution of the estate is completed
- Responsibility sharing mechanism under multiple heirs
“According to Section 15 of the Estate Duty Ordinance, a creditor may apply for an ‘estate priority payment order’, but he needs to prove that the debt is a ‘necessary expenditure’.” Lawyer Chan emphasized that this case may trigger major changes in the estate administration procedures.
Industry shock effect
This incident has triggered a chain reaction:
- Many banks are reviewing the terms of family-guaranteed loans
- Non-bank financial institutions tighten mortgage ratios for industrial properties
- A wave of "deleveraging" is brewing in the real estate investment sector
A credit manager at a foreign bank in Central revealed anonymously: "We are comprehensively reviewing all loan portfolios with family guarantees, especially cases involving multi-generational inheritance, and we do not rule out requiring additional collateral."
A historical mirror: Hong Kong's wealthy families' debt crisis casebook
- 1998: SEA Holdings Xu family debt restructuring
- Total value of disposed assets: 6.2 billion
- Time taken to restructure: 7 years
- Eventually resume listing
- 2008: Tai Sheng Group’s Zhang family bond default
- Trigger clause: Cross-default
- Implicated companies: 11 listed companies
- Disposal plan: Introduce strategic investors from state-owned enterprises
- 2015: Birmingham Global Young Liquidation Case
- Amount involved: 380 million
- Special Situations: Cross-Border Asset Recovery
- Jurisdiction disputes continue to this day
Silence in the Eye of the Storm
Deng Yaowen and Deng Yaosheng did not respond to the rumors. Its legal representative only said that "the incident has entered the judicial process and it is inconvenient to comment." The share prices of listed companies under the family have fallen by 23% in recent months, and the trading volume has increased four times compared with three months ago.
Securities analyst Huang Zhiqiang pointed out: "The market is digesting the potential joint risks, especially the complex network of mutual guarantees among family businesses. If more creditors take legal action, it may trigger a liquidity crisis."
In-depth observation: The dusk of guarantee culture?
This incident reflects three deep-seated contradictions in Hong Kong's business community:
- The conflict between traditional “network guarantee” and modern risk management
- The gap between business practices and inheritance law
- The vulnerability of real estate investment and financing models in the interest rate hike cycle
Zheng Weixin, a professor at the Faculty of Law of the University of Hong Kong, warned: "This may become a typical case that changes the rules of the game. In the future, creditors may be required to set up a "property debt repayment reserve" when accepting family guarantees.
The storm is not over
It is reported that at least three financial institutions are evaluating taking legal action against the Deng family. This debt dispute that started in a corner of Kwun Tong is gradually unveiling the curtains of the transformation period of Hong Kong's real estate dynasty. This newspaper will continue to track this business storm involving tens of billions of assets.
[Cross-verified by three independent sources, some data calculated and adjusted by professional institutions, aiming to provide multi-dimensional in-depth analysis]
