The loan taken on by Star Soul Investments was guaranteed by Chau Cheok Wa, the owner of the company, and also a controlling shareholder of Suncity.

Chau had resigned as chairman and chief executive officer of Suncity after being arrested last month over alleged links to cross-border gambling, with his junket operations closing all of its VIP gambling rooms in Macau in the wake of his arrest.

The letter demanded a full repayment of the loan of HK$313.6 million ($40.21 million) from Star Soul within five business days from Dec. 8, Suncity said in a statement.

If Wooco Secretarial Services Ltd, an agent acting on behalf of a syndicate of lenders, legally enforces repayment of the loans, it may lead to a change in control of Suncity, the embattled gambling group added.

Shares of Suncity and its unit Summit Ascent Holdings Ltd went on trading halts on Dec. 9, pending statements on the possible loan default. The companies have made applications to resume the trading of their shares on Hong Kong Stock Exchange on Dec 13.

($1 = 7.7998 Hong Kong dollars)

(Reporting by Yamini C S in Bengaluru; Editing by Amy Caren Daniel)