M.P. Olo queries status of Hotel’s debt with D.B.S.
The Member of Parliament for Salega, Olo Fiti Vaai, questioned the status of a $50million loan approved by the Development Bank of Samoa (D.B.S.) to fund the reconstruction of the Aggie Grey’s Hotel and Bungalows after Cyclone Evan demolished it in 2012.
Olo raised the question during the 2018/2019 Budget debate in Parliament yesterday. The Opposition M.P. had asked the Minister of Finance, Sili Epa Tuioti, to follow up in terms of loan repayments.
He claimed that some of his constituents, who had loans at D.B.S., were being pursued by the Bank, for failing to pay much lesser amounts.
He said the Government should ensure loans such as one granted back then to Aggie’s Hotel, which has since become Sheraton Samoa under a new ownership, are also vigorously pursued for fairness.
In response, Prime Minister Tuilaepa Dr. Sa’ilele Malielegaoi defended the approval of the loan, saying it is part of the Government’s efforts to encourage tourism developments.
When it comes to lending, Tuilaepa said the Bank considers the assets used as collaterals before a loan is approved.
“So when these things are brought to me, I ask if they have got enough assets (to cover the loan)? They tell me yes there is a lot. So we need to give them another chance because they have got a lot of assets that can be sold by our Development Bank to cover everything.”
In a statement from the hotel last night, it said that despite being struck twice by severe flooding, they have tried to keep up the repayments.
“F.Y.I in 2017 and to date all up, the Hotel itself as an entity paid back 2million Tala to the Development Bank in interest and principle as part of its loan commitments,” the statement reads.
“The Hotel has a Net Value of $112million Tala and this valuation was provided by C.B.R.E. New Zealand and Australia and the debt from the Development Bank is secured by all the Freehold Land at Vaisigano where the Hotel is located as well as all the new buildings and fixtures.
“There is no other debt on these lands and they are fully mortgaged to the Development Bank as the only creditor of the Hotel.”
Back in Parliament, Tuilaepa said that in Samoa there are not that many big business owners.
“And yet these are the people whom we rely upon for taxes. It is not a secret that taxes from them come through their workers and the different services they offer.
He added: “If we were so strict on the condition of these loans, many of our businesses would’ve been closed already.”
The Prime Minister said if such businesses close, the consequences are serious.
“This is why the Government is always trying to help these developments, and it’s why the banks exercise restraint.”
He said there is always the “option of closing them” but “if we close them, what will happen to all these hundreds of people who are employed there? Their churches depend on them, their children’s education depend on them, families depend on them.”
Tuilaepa also raised the issue of foreign-owned businesses flooding to Samoa and the need to encourage locally-owned businesses.
“Many people are complaining about foreign owned business and this is why the Government is holding back, especially our Government bodies, to continue to give our people a chance.
“Let’s continue to give them the chance to persevere with their developments. However long, there will always be a time. If our airline development is successful and there is another plane and another plane, there will be a big help for these developments.”
Tuilaepa added that the tourism industry has allowed the country to benefit from an estimated $400million of revenue over the years.
“This is money used to stimulate the economy. Of all the industries, this is a very important industry. This is why our policies are lenient, especially from the banks, to encourage such developments. Tourism is an important industry to Samoa and it is vital for the economy.
“That’s also the goal in promoting these businesses where the government has moved to set up the airline because if there is no airline, there will not be many people visiting Samoa, and many other related developments.
“This is also why we’ve fixed the airport so that people are attracted and the benefits go back to our people and local businesses.
“Tourism is such a major contributor to our GDP of $2.2billion that is used to run our economy. The bulk of the money comes from the tourism industry.”
The Sheraton Samoa Aggie Grey’s Hotel was sold to a Chinese investment Group in August last year. They were only four months into operation when the Hotel was struck again by flooding, which forced them to close.
They are expected to re-open in August.
In a statement, it said: “As you are also aware, since we purchased the Hotel we have been struck twice by severe flooding. The first flood was far more severe then the Flood of 2012 and as a result we have invested close to 15million Tala of our own funds (No Debt) but a direct Investment by the new Owners of the Hotel to repair the severe damages it suffered in the two floods of February and April 2018.
“As new owners we have had some bad luck with the weather in Samoa but we remain optimistic in our investment as well in the Samoan Governments efforts in relation to Tourism Growth in Samoa.
“We intend to re open the Hotel again in August 2018 and maintain the 300 plus staff that will be employed by the Hotel as well as the Casino and encourage direct Charter flights from mainland China to Samoa. We were well in advance to operate the first charters from China this year to Samoa but unfortunately the Hotel was severely damaged by these two floods of 2018.
“Our concerted efforts now as the new owners are to re open the Hotel and trade again and make every effort to service the debt on the property and assist the Samoan Government in enticing more Asian based tourists with direct flights from mainland China and Hong Kong.”