October 9, 2014 / 11:47 AM / 4 years ago

TPG consortium asks UGL to explain payments to Hong Kong leader- sources

HONG KONG (Reuters) - Private equity firm TPG Capital has asked Australia’s UGL Ltd to provide a full explanation of payments made to embattled Hong Kong Chief Executive Leung Chun-ying when he was a top executive of a UGL-owned property company that a consortium led by TPG has agreed to buy, people familiar with the matter said.

Two people with direct knowledge of the matter said the deal to buy property firm DTZ Holdings for $1.1 billion, which was agreed in June, would not be signed until the full legal and political ramifications of the payments made to Leung are resolved.

The sources, however, said the TPG-consortium was unlikely to cancel the DTZ deal, as the payments Leung received were historical and appeared to be standard for the industry.

“The payment to prevent competition looks standard to me, but you wouldn’t expect anyone to sign this deal until we see how this situation plays out,” said one of the sources, who could not be named due to the sensitivity of the matter.

On Thursday, Hong Kong’s Department of Justice gave the prosecution office authority to handle an investigation into an over $6.4 million payment Leung received from UGL which was related to its purchase of DTZ.

Leung’s office has denied any wrongdoing, but the issue ratchets the pressure on the pro-Beijing leader who is battling pro-democracy protests.

TPG and Hong Kong-based private equity firm PAG, together with co-investor Ontario Teachers’ Pension Plan, teamed up to buy DTZ from UGL.

TPG declined to comment. An external spokesman for Ontario Teachers’ Pension Plan also declined comment. UGL and PAG could not be reached for immediate comment.

Reporting by Stephen Aldred; Editing by Denny Thomas and Miral Fahmy

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