Sierra Leone Business: NASSIT urged to review its dealings with WAHL
The National Social Security and Insurance Trust (NASSIT) through the West Africa Holdings Limited (WAHL) contacted Afrinord- Hotel Investments AS for the provision of a loan facility of US$ 9 million to complete the refurbishment of the Radisson Blu hotel. According to the Technical Audit Report 2019, the loan is secured on the fixed and floating assets of the business and that proceeds from the Hotel’s facilities shall be paid into a Debt Service Account, thereby collateralising the cash flow from the operations of the Hotel. “The loan agreement forbids the borrower to sell, transfer or otherwise dispose in or more transactions any part of the project or the Hotel, declare dividends and terminate the management agreement among other things” it writes. The auditors observed that the loan amount approved for Radisson Blu did not complete the standard requirement of upgrading the Hotel. Therefore, a secondary source of financing was targeted and as at 2014, WAHL had not met some of the terms and conditions of the loan agreement especially the repayment of the loan and quarterly principal. As at 31st December 2014, the amount due stood at US$ l, 872,793.08. WAHL entered into negotiations with the loan providers for the terms and conditions on the loan agreement to be amended, but a negative response was received from the Board of Afrinord. WAHL’s failing to honor its obligation the auditors noted could result in the liquidation of the Company and have rippling consequences for the Trust as majority shareholder and creditor. The penalty charges levied on the Trust were to be addressed to save the image of the Trust. As at the time of the audit, the total payments made by both NASSIT and Radisson Blu for the Afrinord loan were US$ 8,305,575.70 in principal, interest and penalties and the outstanding principal on the loan is US$ 4,267,418.30, “The high debt to equity ratio at the Hotel is also a major concern” the auditors said and advised that NASSIT should look into divesting and or capitalising on their loan and further review the management agreement to allow the entity be able to make profits and pay returns to the Trust on their investment. NASSIT Management revealed that WAHL has not paid dividends to the Trust because it has been financing the Afrinord loan which ranks first in repayment. It further indicated that management signed a subordinate loan agreement between WAHL and Afrinord Investment Bank for which all funds generated from the Hotel’s operation would be remitted into a Debt Servicing Account until the Afrinord loan is fully paid. However, the Trust has been accruing interest in the loan amount which is due to be capitalised to the principal amount and amortised accordingly over the tenure of the loan. The management’s explanations lends to the fact that WAHL is underperforming, it was the recommendation of auditors that the Trust takes a second look in its dealings and arrangement with WAHL. It was also observed that the loan was unsustainable and the books of Radisson Blu Mammy Yoko Hotel should be thoroughly examined to determine the decisions of the Board. “There was no evidence that Radisson Blu has been servicing the NASSIT loan as at the time of the Audit. The operator’s fees in accordance with the Management Operating Agreement were considerably high and there is need to review the MOA” they added. The high management fees charged by Rezidor Group; the uncompleted refurbishment of the Hotel as at the time of the audit, and the fact that the Hotel was opened in a rush in order to meet the six months’ deadline set by the Rezidor Group after which they were to take over the running of the Hotel, could be reasons why Radisson Blu and by extension WAHL are still unable to pay back on its obligations.
|Amount in US$||Default||Repayment||Balance|
|Loan amount from Afrinord||9,000,000||9,000,000|
|Outstanding interest after six months grace period||582,417.00||582,417.00|
|3rd July, 2016, NASSIT repayment||1,872,753.08|
|Repayment by Radisson Blu||5,455,000.00|
|Principal Loan Repayment||5,314,998.70|
|Interest on Loan||2,603,038.08|
|Outstanding Principal as at 1st July 2018 (Afrinord Loan)||4,267,418.30|
|Total NASSIT Loan||19,686,667.56|
Source: WAHL Loans
By Zainab Iyamide Joaque
Monday May 6, 2019.