Pan Sutong put bets worth billions of dollars on a huge plan to build luxurious residences located in Tianjin for China’s newly riche. However, the gamble paid off and Pan’s creditors want to take Pan’s assets.
Pan Sutong’s empire was at its height and had no competitors. Pan Sutong, 59 years old property magnate had amassed an $12.2 billion fortune, which included a lavish home located in Hong Kong virtually next door to the city’s richest person Li Ka-shing. He also owned grapevines located that he owned in California and France and France, as well as the horse breeding and training grounds in Australia spread over more than 1200 acres.
Despite never having finished college, Pan managed to build his Goldin Group into an expansive conglomerate that spans consumer electronics winemaking, financial services and, perhaps most importantly of all, real estate. The goal of his master plan was to construct Goldin Metropolitan, a sprawling mini-city located in Tianjin which is home to around 14 million residents 85 miles south of Beijing. The project would include 13 towers 33 mansions as well as the tallest building in China that would rise 117 stories in the air.
However, Pan’s plans are being ruined by a mountain of debt. The work on his dream project has come to a standstill and creditors are seeking to liquidate of his businesses in both Hong Kong and Bermuda. The mansion he owned located in Hong Kong had to be repeatedly remortgaged to get money desperately needed. The once famous entrepreneur, who climbed to the number. 7 on Hong Kong wealth ranking just five years ago, has to fight for survival to keep his business afloat.
The Hong Kong highest court was able to order Pan to go into bankruptcy, and to disband the holding company he owns in relation to unpaid debts of HK$8 billion ($1 billion) due to Citic Bank. The decision is currently being challenged since the tycoon as well as his company holding are in the ability to pay back the debt, as per an official from the Pan representative. However, Pan’s problems don’t stop there. Pan’s creditors have also filed a separate bankruptcy petition. Bank of China has lodged an additional bankruptcy suit against Pan within Hong Kong for another 740 million yuan ($109 million) in debt that he hasn’t yet paid.
The case was heard on the 2nd of August and is suspended pending the outcome of Pan’s appeal to the ruling earlier. Meanwhile China’s bad-debt management firm Cinda Asset Management has added more legal issues for Pan by taking on Pan and some of his companies for an additional 7.4 billion Yuan ($1.1 billion) in loans that are not paid and accrued interest linked with Tianjin. Tianjin project.
A division belonging to Deutsche Bank has filed a petition in Bermuda to request the liquidation Goldin Financial Holdings, the Hong Kong-listed firm which holds the Pan’s wines, financial, and real estate development companies.
“He must come up with an avenue to pay off the debt, or negotiate an agreement with creditors,” states Kenny Ng who is a securities strategist with Everbright Securities. “Otherwise there is no option but to go bankrupt.”
Pan Pan, who lived his teens within his native U.S. but moved to Hong Kong at the age of 21, began to venture into the world of consumer electronic products. Pan founded his Matsunichi company in Hong Kong’s Asian financial center in 1993, to manufacture MP3 players and television monitors for karaoke. Then, in 2002, the company bought the Hong Hong Kong-listed Emperor Technology Venture and renamed it Matsunichi Communication Holdings. A booming real property market in China in the early 2000s was a subject of his interest and he made the decision to change direction.
Matsunichi was changed to Goldin Properties in 2008, that same year that Pan bought a Hong Kong-listed firm , Fortuna International, which was later rebranded as Goldin Financial. The stock prices of the two sister companies shot up and soared by 40% increase within a single day and gave Pan an estimated net value that was $12.2 billion in 2016. Hong Kong’s financial watchdog however has issued warnings to investors warning regarding Goldin Properties’s excessive percentage of shares held after the wildly fluctuating price.
This $1 billion loan by Citic that was personally guaranteeing by Pan is intended to pay for Pan’s $1.5 billion sale of the Goldin property division in the year 2017. This type of move is usually carried out when shareholders of the controlling shareholder believe that the market is not valuing their business, as Everbright’s Ng.
Goldin Properties had primarily focused on real estate with a high-end price. It is the company that is responsible for building the mega-project in Tianjin. The development was inaugurated in 2007 due to the fact that Pan believed in Tianjin’s chances of becoming an economic hub in the region, according to Goldin’s website.
Since then, the importance of Tianjin’s economy has diminished the Pan investment holding firm Silver Starlight hasn’t repaid a loan that was due in the year 2019. The company also hasn’t made any other payments, except for the interest that was due at the end of 2020, as court records reveal.
Construction of the building was stopped in 2015 when it received the Goldin said was the equivalent of a $5.9 billion investment. This is far short of the $10 billion required for the construction of the building. Today, the tower is popular by Chinese websites as China’s biggest “lan wei lou,”or orderelict structure.
Yan Yuejin, research director of the E-house, a Shanghai-based China Research Institute, says Pan intends to stay clear of selling his assets and plots of land in Tianjin to pay creditors since doing so is acknowledging the failure. This would also require the dissolution of his real estate firm.
“The Tianjin project is grandiose and is a challenge to abandon in exchange for Pan,” Yan says. “But in the event that all else is unsuccessful, then the next step is to trade it for cash in order to address the debt problem.”
The price, however, is a different issue. Chinese president Xi Jinping has been working to curb the rise of house prices and cut financial leverage, which has caused a devastating loss to China’s property market. Developers are cautious about purchasing property especially since numerous have faced their own cash flow issues and have recently defaulted on their loans.
In the past, Pan had to walk out of various others projects that were being developed in Hong Kong. Pan gave up his rights to build a new residential property located in Ho Man Tin in 2020 as well as lost the $3.2 million deposit in the year 2019 to stop his participation in the $1.4 billion bidding for a land parcel on the previously-used Kai Tak airport site. Goldin Financial was able to spend nearly $1.2 billion to purchase the land in Kai Tak in 2018 that was later sold in the form of a heavily discount $446.5 millions in cash deal that also included a profit-sharing contract which entitles Goldin to 30 percent of future profits development on the site after an earlier deal worth $898 million was ended.
“Judging from Pan’s debt dispute and the projects that he has undertaken in Hong Kong, he faces massive cash shortages” E-house’s Yan. “He is in the process of bankruptcy and it’s all dependent on whether he is able to sell additional assets from Hong Kong to prevent this from taking place.”