Grey Group responds to D.B.S. debt report
The Director of the Grey Investment Group, Lupesina Frederick Grey, has responded to “set the record straight” with regards to reports about a $50 million tala loan with the Development Bank of Samoa.
The loan, taken out to assist in the full refurbishment and extension of the Beach Road property, was the subject of a front-page story titled “Govt. will act on $50m in two months, says Minister of Finance” published by the Samoa Observer on 10 December 2018.
The story quoted the Minister of Finance, Sili Epa Tuioti, as saying that if repayments for the loan were not up to date by January 2019, the Government would begin to seize the assets used as collateral for the loan. These included the iconic hotel on Beach Road.
Responding to questions posed by the Samoa Observer to the Group, Lupesina said they have nothing to hide, disputing claims that the Group has made no repayments to the loan.
“The statement that we have made no repayments is false and you have now seen proof of this for yourself. We have made substantial repayment having particular regard to the term of the loan,” he said.
The Group provided an email from local accounting firm, Lesa ma Penn, to confirm the amount they have paid back to the Development Bank of Samoa.
They also provided copies of bank statements, bank swifts to confirm funds the Group has sent back to Samoa to invest in the refurbishment of the Sheraton Aggie Grey’s Hotel and Bungalows.
Lupesina explained that the Group took out the loan to assist in the full refurbishment and extension of the Beach Road property after Cyclone Evan demolished it.
“The loan was a long term loan and was to run for many years,” Lupesina said. “The Grey family has made multiple re-payments towards the Development Bank loan totaling $3,650,000 million tala. We have made substantial repayment having particular regard to the term of the loan.” (read full interview transcript below)
But the Group sold the hotel to Chinese investors which currently operate it.
Asked who is responsible for the balance of the debt, Lupesina said: “I wish to respect each party’s privacy and confidentiality as much as possible and so will talk to the extent that I can."
“However when we sold the Hotel in late August 2017 the sale took place by way of transfer of shares. The mortgages of DBS are publicly searchable and you can see that they are registered against the Hotel itself."
“Where you purchase shares in the company unless you agree otherwise you take the shares with all assets and liabilities (Debt) of the company. This is often reflected in the purchase price. In general terms if a purchaser of shares takes over the loan they might pay a lesser price having regard to the liability (Debt) they are inheriting.”
The Director of the Group also pointed out that since the start of the refurbishment project, the Grey family and the Grey Group have invested more than $35,000,000 million of their own money into the project.
“As a family and as an Investment Group we invested plus $35,000,000 million tala from our own cash resources to refurbish and expand the Hotel,” Lupesina said.
“We have provided your newspaper with banking information verifying this and our local auditors can verify this also as well as the local banks. So this notion that we didn’t contribute any cash funds ourselves as a family and as a Group is totally wrong. That’s a lot of money to come back into Samoa and the Hotel but we felt it necessary and important to complete the Hotel and finish it.”
The following is the Question and Answer in full:
1: A number of people have asked that the Hotel took out a $50,000,000 million Tala loan with the Development Bank of Samoa to rebuild the hotel, then the hotel was sold to a Chinese Investment Group from mainland China, and to date no loan repayments have been made to the Development Bank. What do you say about this?
“Prior to the sale, the Hotel entity did take a loan with the Development Bank of Samoa to assist in the full refurbishment and extension of the existing hotel as it stands today. This was in the aftermath of cyclone Evans which devastated the Hotel. The loan was a long term loan and was to run for many years. The Grey family has made multiple re payments towards the Development Bank loan totaling 3,650,000 million Tala. We have provided you bank details to verify this and local auditors have verified this as shown to your newspaper. The statement that we have made no repayments is false and you have now seen proof of this for yourself. We have made substantial repayment having particular regard to the term of the loan”.
2: Since the sale of the hotel to the Chinese Investment Group last year, who is now responsible for the loan?
“I wish to respect each party’s privacy and confidentiality as much as possible and so will talk to the extent that I can. However when we sold the Hotel in late August 2017 the sale took place by way of transfer of shares. The mortgages of DBS are publicly searchable and you can see that they are registered against the Hotel itself. Where you purchase shares in the company unless you agree otherwise you take the shares with all assets and liabilities (Debt) of the company. This is often reflected in the purchase price. In general terms if a purchaser of shares takes over the loan they might pay a lesser price having regard to the liability (Debt) they are inheriting”.
3: How much have you paid back so far? And how much do the Chinese need to pay?
“The Hotel has paid $3,650,000 million Tala back to the Development Bank of Samoa and the bulk of these payments have come from the Grey Family and the Grey Group. Since selling the Hotel to the new owners, I am not privy to what the new owners currently owe the Development Bank let alone what arrangements they have in place with the Development Bank. All I was made aware of was when the Hotel flooded twice this year, I know for a fact the new owners invested more than 10,000,000 tala of their own money to repair the Hotel from the two floods of February and April of this year. This was not another loan but was in fact cash from the new owners themselves.”
4: If the Government, as the Minister of Finance has indicated, were to seize assets, whose assets will they be ceasing?
“That is for the Government to establish and the new Chinese owners to consider but it is likely the Government will have a bundle of rights given their security in the Hotel. I think it’s also very important to make it clear that all the freehold land where the hotel is located, along with all the buildings and other assets are all mortgaged to the Development Bank as first mortgagee and there are no other Banks involved. Therefore if the government is dealing with any assets it will be the Hotel. The bank may well also have other forms of security. But there are other commercial considerations and lawful processes that have to be taken into account by the Government before they proceed and that is something I am sure they are carefully considering to maximize the benefit to the people of Samoa”.
5: The Minister of Finance Sala Sili Epa recently made some public comments about the state of debt with the Development Bank of Samoa. What are your thoughts on what was said and can you comment?
“ My belief is that the Hon Minister was quoted out of context on the whole matter. I am talking to you to set the record straight as some of the implications from his statement potentially being taken out of context, were not accurate.”
6: In the rebuild of the Hotel. How much personal funds did the Grey Family and the Grey Group invest in Aggie Grey’s Hotel and where did the source of this funding come from?
“As a family and as an Investment Group we invested plus $35,000,000 million tala from our own cash resources to refurbish and expand the Hotel. We have provided your newspaper with banking information verifying this and our local auditors can verify this also as well as the local banks. So this notion that we didn’t contribute any cash funds ourselves as a family and as a Group is totally wrong. That’s allot of money to come back into Samoa and the Hotel but we felt it necessary and important to complete the Hotel and finish it. It was also tempting after Cyclone Evans to walk away but we felt a responsibility to rebuild it, as it is a Samoan institution, its importance to Samoan tourism and for the 350 plus employment opportunities it provides to the wider community. But as shown to your newspaper in terms of all bank Swifts and TT confirmations, we invested plus 35,000,000 million Tala of our own cash funds back into the refurbishment and extension of the Hotel”.
7: Aggie’s is part of the fabric, history and legend in Samoa and always will be, to an extent the South Pacific, if the Development Bank were to foreclose on the Hotel and the Chinese Investors walked away would you be interested to take the Hotel back and own it again.
“In the unlikely event and I stress in the unlikely event the current owners were to walk away and not resolve any issue with the Development Bank then we would seriously consider it. However we want to be respectful of any discussions that may be taking place between the new owners and DBS as we note they are still the current owners”.
8: What needs to happen if Samoa is to stay competitive with other Pacific tourism giants like Tahiti, Fiji and the Cook Islands?
“Honestly, I don’t think Samoa is struggling. Our issue is we are too reliant on two main markets. New Zealand and Australia. They are seasonal markets and we need to find other Markets like North America, Asia, South America to fill the void left when the tourism season there enters the rainy season months. If they can do that things will boom in Samoa. We have great Resorts and Hotels so there is no reason why we can’t do it now”.
9: If you were running the Samoa Tourism Authority today, what would be your priorities?
“I think Sonya Hunter is doing a great Job. And so is her Chairman Adele Kruse. We can criticise them all we want but you have to also look at the resources they are given to work with. Compare the STA budgets to those of Fiji, Cooks and Tahiti and then you compare “apples for apples”. These other destinations have much bigger marketing budgets then Samoa and that’s the disappointing part. My hope is that the Government needs to spend more on Tourism awareness outside of Samoa and look for these new markets. We also need Airlinks which will make it easier for us to attract these new markets.”
10: What is your vision for tourism in Tahiti and Samoa for the next five years? And do you plan to expand further than French Polynesia?
“Like I said Samoa needs to look at new destinations. Like North America, Asia, South America and the emerging markets. And it also needs to target high end markets like the ones I’ve mentioned and not concentrate solely on the Kiwi and Aussie Markets. We need to get away from these traditional Markets which in many cases are low yield markets”.
12: Air Transportation is one of the biggest problems for Samoa, what do you think of the Government’s decision to get rid of Virgin Australia to set up Samoa Airways? What can the Samoan government do to improve air services to Samoa?
“The Government as a Government is entitled to do whatever it wants. If it sees the need for its own airline then good on them. And honestly I think it’s a good idea to have our own Carrier. My only suggestion is “new markets”. We have to go to North America as to me that’s a Key growth market for Samoa. If a Resort in Bora Bora can charge USD$3000 a night without Breakfast and President Obama pays USD$15,000 a night at the Brando Resort on Marlon Brandos Island and stays for a month then so can some of our boutique Resorts. But it comes down to the Market that can afford to pay those prices. That’s why I keep saying if we need to grow as a destination then we need the USA, Europe and other emerging markets. Fiji has done it well and so has Tahiti. In fact Tahiti more so for the very high end luxury market it now caters for the super wealthy”.
12: Coming back to the Aggie’s hotel in town, the place has been hit badly by flooding during the past few years, what do you see as the solution?
“Yes it’s always been the issue with the Hotel and I hope the new wall that Ott Constructions has put up will eradicate any more future threats of flooding as it will only get worse with Global warming. It’s always been gut wrenching seeing it flood time and time again and more so this year after all the monies spent to bring it up to a five star luxury Hotel. A real shame”.
13: Lastly we have read in a French publication that the Group is carrying out a 80m USD project in refurbishing it’s Hotels in Bora Bora. Can you tell us a bit about this and how it is being funded?
“Yes we have begun to refurbish the first of two Sofitel Hotels in Bora Bora. There are two, the Sofitel Marara Bora Bora which is on the Mainland of Bora Bora and the Second which is a Private Island in Bora Bora. Both Hotels are going through major refurbishments as well as expansions and they have begun. French Polynesia and France have great government and tax programs for capital investments and to assist developing tourism related projects such as luxury resorts, cruise ships and airlines. You will find these tax programs and capital investment initiatives in all French Territories and not just in French Polynesia.”