Richard Li, PCCW chairman, has taken the extraordinary step of providing the buyer of a stake in his company with the majority of the funding.

Mr Li on Tuesday said Pacific Century Regional Developments, PCCW’s largest shareholder and which is selling its entire 23 per cent stake to Francis Leung for HK$9.2bn ($1.2bn), has agreed to fund 70 per cent of the deal.

Mr Leung will only have to pay PCRD, controlled by Mr Li, HK$2.7bn by this December as a first payment. The 70 per cent, plus interest, can be paid to the company in tranches by June 2008. The unusual arrangement will surprise investment bankers.

Meanwhile, Macquarie Bank and TPG Newbridge, the Asia affiliate of the US buy-out group, are still pursuing PCCW’s telecommunications assets, in spite of being bypassed by this week’s deal in which Mr Leung became the company’s new controlling shareholder.

Mr Li on Monday sold a 23 per cent stake in the company to Mr Leung after he failed to sell PCCW’s main assets to foreign investors due to dissatisfaction from state-controlled China Netcom, PCCW’s second-largest shareholder.

The unexpected sale dealt a blow to Macquarie and TPG Newbridge, which had been locked in a bidding war for PCCW’s core assets since last month.

It is understood Macquarie, which tabled a $7.3bn offer, is still hoping to buy some of PCCW’s assets, as long as it can add value in a friendly deal.

TPG Newbridge, which trumped Macquarie’s offer, is also expected to continue discussions with Mr Leung, although both overseas groups accept that any deal could take several months to conclude. Both groups yesterday declined to comment.

One Hong Kong banker yesterday said: “This saga has a long way to run yet and there will be further twists. Macquarie or TPG may yet acquire some assets, if only to help Mr Leung fund his deal with Mr Li.”

PCCW on Tuesday appeared to encourage the bidders. It said its board would “continue to pursue the expressions of interest from Macquarie and TPG Newbridge”.

Mr Leung was forced to strike a deal with Mr Li after several Hong Kong tycoons decided against joining a local consortium to bid for Mr Li’s stake.

Mr Leung until last week was a senior adviser to Citigroup in Hong Kong. Last Friday he severed his remaining ties with the bank to “pursue private investment opportunities”. It is understood Citigroup is acting as Mr Leung’s sole financial adviser.

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