Luso International Banking has sued Hong Kong Airlines for allegedly failing to repay a large portion of a USD20 million loan, following repeated demands.
According to a South China Morning Post report, court documents showed that the airline borrowed USD20 million from the local bank in October 2017 on the condition that the principal loan must be repaid with interest by December 28, 2018.
However, the bank’s lawyers said that the troubled airline had only paid USD257,943 by January 1, breaching its contractual obligations.
Thus on January 2, the bank demanded the outstanding debt be paid within seven days.
Luso International Bank also wrote to subsidiary Hong Kong Airlines Limited, now listed as the defendant, following its agreement to provide a guarantee.
“Despite repeated requests and demands […] the borrower has failed to pay the outstanding debts due and payable to the plaintiff, and the defendant has failed to pay the guaranteed amount to the plaintiff or any part thereof,” the writ said.
Luso International Bank was incorporated in Macau in 1974 and has become a wholly-owned subsidiary of Xiamen International Bank, the first joint-venture bank in China. According to information available on the bank’s website, in 2015, it completed “the capital injection process and has become a truly local bank in terms of shareholdings.” In 2016, the bank’s first mainland Chinese branch opened in Guangzhou after approval by the relevant mainland and Macau authorities.
Meanwhile, earlier this month, Hong Kong’s Air Transport Licensing Authority said that it had reviewed Hong Kong Airlines’ finances and had demanded further clarification.
An airline spokesman told SCMP that the company had been working with the bank to address the outstanding issue.
“This has no impact on our business and we are operating as normal,” he said.
The troubled airline is yet to find a chief of finance after a former executive resigned in December after fewer than 18 months on the job.
Since July 2018, the airline has seen six directors leave their posts.
Hong Kong Airlines, backed by debt-laden Chinese conglomerate HNA Group, operates 38 passenger aircraft and flies to 36 destinations.
According to reports, the group sold its last land plot near the Hong Kong’s former Kai Tak airport for HKD3.9 million, ending its ambitions for a massive residential project.