Indebted hoteliers on notice
The Chairman of the Development Bank of Samoa (D.B.S.), Leasiosiofaasisina Oscar Malielegaoi, has warned hoteliers with outstanding loans that the bank will not hesitate to foreclose upon them if renegotiated agreements are not honoured.
Leasiosio, who is also the Ministry of Finance Chief Executive Officer, said the Government will not write off the debts.
“The debts have not been written off. The 18 months is a breathing space to restructure their finances or even look for potential buyers,” he said.
In May last year, Cabinet stopped D.B.S. from taking legal action and seizing the assets of at least eight tourism properties with outstanding loan; it gave them until November, 2021 to service their loans.
Last year the Minister of Tourism, Sala Fata Pinati, asked for Cabinet assistance on tourism properties that were “financially distressed” and in heavy debt.
Sala at the time urged the Government to advise the financial institutions to hold off on "all legal action" against the properties while a solution was being worked out.
On Friday, Leasiosio said the bank would move to foreclosure the hotels once the grace period is up, if they are not in compliance with arrangement.
“The D.B.S. and its board submit reports to Cabinet all the time, updating them on the status of hotels in questions," he said.
“We inform them, of the hotels that are making payments regularly which are a sign they are genuine with their request for assistance. But for hotels that have not made any payments, indicates they are not genuine with their requests.”
He said the bank is waiting to take action once the grace period is concluded next year.
“They all sign the agreement, they wills service their loan and honor the agreement,” he said.
Last year Minister Sala expressed concern the move by D.B.S. would have huge implications for hoteliers.
“It’s true; the hoteliers may have been reckless when they didn’t make the repayments and I’m certain there are reasons behind that, but in the end, the Cabinet have to consider the consequences once the Government proceeds with the D.B.S. auctions,” he said.
Asked about the issue of parity considering other debtors are faithfully making their repayments, Sala said the issue is unfortunate.
“I want to make it clear the Government will not write off the debts,” he said.
“This is only helping to postpone the legal action by Development Bank that had already moved to auction off the assets of some of these hotels."
The D.B.S. was found to have an unusually high rate of non-performing (or overdue) loans on its books, which rose to up to 50 per cent of its outstanding money in 2016, a report released by the Asian Development Bank last year found. Large corporations, about two-thirds of which were in the tourism sector, represented the majority of the bank's outstanding loan owners.