Banks race to lend Hutchison Telephone

Hong Kong tycoon Li Ka-shing doesn''t actually have to guarantee loans to guarantee them for companies connected with him.

Hong Kong tycoon Li Ka-shing doesn't actually have to guarantee loans to guarantee them for any company connected with him.

A group of 32 banks from around the world have a signed an agreement to lend HK$4 billion to Hutchison Telephone Company, Hong Kong's leading mobile phone company, in which Li Ka-shing's Hutchison Whampoa ports-to-retail holding company owns a 74.9% stake.

Technically the loan carries no guarantees from the telephone company's shareholders, which include US-based electronics company Motorola, and NTT Mobile Communications Network, a Japanese wireless phone company. Motorola holds 25.1% and NTT holds 19%. In reality, analysts say, Li's presence, albeit shadowy, makes the chances of default very slim.

"Li basically underwrites the entire Hong Kong economy," says Robert Sassoon, an analyst at SG Securities in Hong Kong. "He's as good as the picture of George Washington on the back of a dollar note."

The loan comes as banks, venture capitalists and investors are tightening their fists in terms of lending to the volatile telecommunications and technology sector. Still, it's not just Li's name that's giving Hutchison Telephone a boost. With 1.4 million subscribers, a third of the Hong Kong market, the company has real assets and real cash flow.

"The banks aren't giving money to some would-be internet company with no assets behind it," says Sassoon. "There's a strategy here."