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The controversy surrounding PCCW, Hong Kong’s flagship telecoms operator, deepened on Thursday after it emerged that the billionaire Li Ka-shing, whose son Richard sold a controlling 23 per cent stake in the company to a high-profile investment banker, financed the deposit that sealed the deal.

The disclosure has embarrassed the parties in the complex transaction, as all have repeatedly insisted that Li Ka-shing was not involved in financing Francis Leung’s purchase of the stake.

Mr Leung agreed in July to buy the 23 per cent stake in PCCW owned by Pacific Century Regional Developments (PCRD), a Singapore-listed company 75 per cent owned by Richard Li. PCRD and Mr Leung said on Thursday that the money provided by Li Ka-shing was only a temporary source of financing for the deposit and was repaid at commercial rates of interest within 10 days.

The revelation is sensitive because proven links between Li Ka-shing and his son in relation to the deal could potentially derail the HK$9.2bn (US$1.2bn) transaction between Richard Li and Mr Leung, a former Citigroup banker.

Li Ka-shing said on August 24: “Francis Leung is one of my good friends. I’ve known him for many years. I don’t know his source of funds. At this moment, Mr Leung has not received any money from me.”

Announcements filed to the stock exchange authorities in Hong Kong and Singapore on Thursday disclosed that, with Li Ka-shing’s knowledge, Mr Leung paid the HK$500m deposit from funds handed to him by Mr Li Ka-shing for private investment purposes.

Mr Leung said Mr Li Ka-shing was not involved in his continuing attempts to secure financing for the deal. Mr Leung has promised to name his backers by the end of November, when he is due to pay the first of three agreed instalments to PCRD.

PCRD shareholders have yet to ratify the sale of the stake and Singapore’s authorities are likely to prevent Richard Li from voting on the deal if a “related party” such as Li Ka-shing is involved in financing Mr Leung.

Minority shareholders could block the deal in the hope of a higher offer. The vote is expected to be held in mid-November.

The Hong Kong and Singapore authorities appeared to have accepted assurances from Richard Li and Mr Leung that Li Ka-shing’s money was used as a “temporary source of financing” and did not plan to block Richard Li from voting.

David Gerald, president of Singapore’s Securities Investors Association, urged Richard Li to abstain because the “closeness of the relationships . . . makes minority shareholders feel a little bit uncomfortable”.

Asked why he did not reveal the source of the HK$500m loan when the deal was announced in July, Mr Leung said : “I don’t think I needed to disclose it because it is a matter of my personal financing.”

Additional reporting by Tom Mitchell in Hong Kong and John Burton in Singapore.

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