Stephen Hung has been a name synonym with luxury, at least in Macau (Macao). His fame spiked – temporarily – when he ordered a mind-boggling 30 Rolls-Royce for Louis XIII, which was later renamed as “The 13”. That was 3 years ago and since then his luck and fortune has taken a plunge for the worse. Superstitious or not, it seems the number “13” plays a role to his misfortune.
The purchase of 30 Rolls-Royces – all painted in “Stephen Red” – was then the largest fleet of custom Rolls-Royce Phantoms and were delivered to Mr. Hung in 2016. Mr. Hung even sent her battalion of butlers to Paris for training and hired a direct descendant of Louis XIII (a monarch of the House of Bourbon who ruled as King of France from 1610 to 1643) to advice on French luxury.
Together with his wife Deborah Valdez, a former fashion model (with a resemblance to Audrey Hepburn) from Sonora, Mexico, the couple took the world of the rich and famous by storm. Married in 2012, Deborah is the owner and chairman of one the most exclusive modelling agencies in Asia and Europe – Dreamodels. They were even named “Couple of the Year” at the 2014 Hong Kong Tatler Ball.
Interviewed a year ago what the secret of his success was, Hong Kong-born billionaire Stephen Hung proudly declared – “There is no such thing as luck. If you’re not willing to commit then don’t even think of starting.” Being born with a silver spoon to a family that made billions from property deals, of course the chairman of “13 Holdings Limited” can claim anything about his secret recipe.
His US$1.6 billion property – “The 13” – was supposed to be the most luxurious hotel in the world. Featuring 200 “all-villa” rooms and a top suite (1,858-square-metre room) that will cost US$130,000 a night, you actually need an invitation to enter and shop in private boutiques at the red-tower resort, simply because jewellery items there would cost between US$1 million and US$100 million a pop.
That would put the most luxury and expensive hotel in Dubai to shame. Even a single bet on the estimated 66 gambling tables at “The 13” is at minimum US$650 (HK$5,000; £493; RM2,727). Today, the flamboyant billionaire, who actually drove a Rolls-Royce to work while he was an intern, might regret for bragging that his success had nothing to do with luck.
Perhaps offended by the 58-year-old billionaire’s arrogance, the Lady Luck appears to be playing some tricks on Mr. Hung’s bet on casino business in Macau. The 22-storey “The 13” super luxurious hotel, located south off the Cotai Coast, is still neither open nor in possession of a casino licence. Worse, the 13 Holdings Limited has a huge hold of debts.
The 13 Holdings Limited, which is listed on the Hong Kong Stock Exchange, and of which Mr. Hung is joint chairman has warned that building delays and a lack of cash had cast “significant doubt on the group’s ability to continue as a going concern”. In fact, the company’s latest financial results ended March 2017 revealed that its liabilities exceeded its assets by HK$300 million.
The holding company was desperately in need of a capital injection of HK$951 million (US$121.7 million; £92.2 million; RM511 million), but the money could not be raised, forcing it to sell 52% stake in Paul Y. Engineering Group – an engineering subsidiary. The 13’s share price has plunged more than 90% of its 2014 peak and is now worth less than one Hong Kong dollar at HK$0.88 a share.
Mr Hung, the company’s chairman and a former Merrill Lynch banker recognizable with his dyed hair and outlandish outfits, will need to sign a deal with one of Macau’s 6 casino concession holders to operate its gaming facility. Thereafter, he needs to secure licences from the local government for each table. But Mr. Hung’s bet couldn’t come at a worse time.
Two years after Hung unveiled his over-ambitious project, President Xi Jinpingarrived in Macau to lead celebrations marking 15 years since the former Portuguese enclave returned to Chinese sovereignty. The Chinese president also brought along the bad news – the VIP clients “The 13” had been targeting were no longer welcomed.
As part of Beijing’s already wide-ranging crackdown on corruption, the president said Macau’s future lay in diversifying its economy away from VIP gaming, of which the VIP revenue fell 40% in 2015 alone. Overnight, Hung’s plan to squeeze money at gambling tables from the clientele base, mostly from mainland Chinese rich but highly corrupted officials and businessmen, vaporized into thin air.
Rubbing salt into injury, The 13 Holdings Limited’s CEO Walter Craig Power said – “The global economy continues to face political uncertainties while growth in mainland China and the US is rebounding cautiously. China will be holding its 19th Party Congress later this year during which important decisions will be made in respect of the pace of continued reform of the Chinese economy.”
It certainly doesn’t help even if Stephen Hung could force the opening of The 13 next year, as several other multibillion-dollar casinos are set to be launched – such as MGM Cotai, Morpheus and Grand Lisboa Palace. Of course, the main problem is Mr. Hung has to pay the concession holder a fee that will eat into his profit margin. But he’s not the only investor at the receiving end.
The red tower hotel has big-name investors, including Janus Capital Group Inc., Fidelity International Ltd., Omega Advisors Inc. (17%), the Ontario Teachers’ Pension Plan and Steve Cohen’s SAC Capital Advisors (8.8%), who all took sizable stakes in the company after the project, was announced in November 2012. Their investment is now barely above penny-stock status.
Perhaps Mr. Hung thought he could bend the rule of law as he likes. Although Louis XIII is actually located in Coloane, the billionaire defiantly claims that Louis XIII sits at the south end of Cotai. It’s a well-known fact that no casinos are allowed in Coloane. Now, it’s unclear if any of the 6 concessionaires would even want to work with Mr. Hung, who looks more like a triad member than a self-made billionaire.
Perhaps the billionaire should revert the inauspicious “The 13” back to its original “Louis XIII” in order to re-evoking the French king’s ornate splendour. Stephen Hung can claim anything he likes but the fact that he was willing to sell Paul Y. Engineering to a business partner – Charles Chan – for just HK$300 million, a roughly 35% discount on the book value, speaks volumes about his desperation for cash.
Even his 30 custom Rolls-Royce Phantoms acquired in 2014 for US$20 million have been pledged to creditors. Mr. Hung is reportedly owed China’s Bank of Communications Co. a whopping HK$3 billion (his total debt has stretched to HK$4.5 billion). There’re 2 options left – sell “The 13” – to Charles Chan, who is nicknamed the “King of Shell Companies”, or to an existing gambling operator with a license in Macau.