Inter Milan boss and Suning founder’s son Steven Zhang liable for US$255 million in landmark verdict against China’s keepwell undertakings
- Zhang Kangyang, also known as Steven, was sued by offshore creditors last August to recover US$255 million of loans and a defaulted bond that bears his guarantee
- The High Court of Hong Kong found for the creditors’ representative China Construction Bank, rejecting Zhang’s defence of forgery and ignorance
The scion of one of China’s largest e-commerce retailers and the president of the Italian football club Inter Milan has lost a court case in Hong Kong, making him liable for US$255 million (HK$2 billion) of debt.
Zhang Kangyang, also known as Steven, was sued by creditors last August to recover US$255 million of loans and a defaulted bond that he guaranteed, pledges that he subsequently reneged, citing forgery and ignorance. The Hong Kong High Court found for the creditors’ representative China Construction Bank (Asia) Corporation Limited, according to a verdict delivered on Tuesday.
“There is little room for doubt that [Zhang] did participate in the original financing of the project, and for which he had given his personal guarantees,” the High Court judge Hon. Anthony Chan ruled in his verdict. “Considered in such light, Zhang’s attempt to distance himself with the refinancing has little merit.”
The verdict puts the creditors in the position to claim the US$255 million owed by Zhang, as well as interest and costs, the plaintiff’s lawyer said.
Separately, China Construction Bank (Asia) filed a civil lawsuit in Milan asking the local court to invalidate a February 2019 waiver of pay for Zhang at the football club, which would help creditors in their bid to recover their assets.
Other creditors are also going after Suning. A group of bondholders including Bank of Shanghai and Guangdong Huaxing Bank have garnered at least 25 per cent of the securities to demand immediate payment, South China Morning Post reported last year citing people familiar with the plan.
Zhang is the son of Suning’s founder Zhang Jindong, who expanded from a seller of air conditioners in 1990 into China’s largest appliance retailers, with 10,000 branches throughout the country at its peak. The business empire began to unravel in June 2021 after a Beijing court granted an order to freeze Zhang’s interest in 540.2 million Suning shares listed on the Shenzhen Stock Exchange.
In July, the provincial government of Jiangsu – Suning was founded in the provincial capital Nanjing – led a US$1.4 billion takeover of the retailer, involving this newspaper’s owner Alibaba Group Holding, the gadget maker Xiaomi, and the computer maker TCL, in a move that diluted Zhang’s holdings.
Alibaba’s Taobao China Software unit is Suning’s largest shareholder, with almost 20 per cent of the retailer. Zhang resigned as chairman after the state-backed takeover while Peter Huang Ming-Tuan, founder and chairman of Alibaba’s Sun Art Retail Group hypermarket chain was named Suning’s chairman.
Is a turning point in sight for holders of China’s guaranteed bonds?
Zhang also owns 68.5 per cent of the Internazionale Milano football club, a controlling stake that allowed him to name his son president of Inter Milan in 2018 at the age of 26.
The younger Zhang guaranteed the refinancing of US$255 million of loans and bonds signed in 2020. In his defence, presented by Hong Kong’s former Legislative Councillor and lawyer Audrey Eu Yuet-mee, Zhang said the signatures on the refinancing guarantee documents were forged, and that he was not aware of the refinancing, a claim that the judge rejected.
“On the evidence before the court, I am unable to accept that Zhang has shown a believable defence of forgery,” Hon. Chan wrote, pointing out that Zhang’s evidence is “contrary to inherent probabilities and common sense,” and “his explanations on various evidential fragilities ring hollow.”
“The creditors were extremely disappointed that instead of working on repaying his debt, Zhang attempted to evade his responsibilities and chose to advance defence which was clearly not credible and against common sense,” said Jason Kang, a partner of Kobre & Kim, who represents some of the creditors in this case. “This is the first judgment against Zhang obtained by creditors outside mainland [China]. The creditors will take all necessary legal actions in multiple jurisdictions to enforce this judgment.”
