Muneshwer’s Limited now owns the single largest block of shares (40%) in Hotel Tower Limited as a result of a recent takeover by a local investor group. The new investors are moving to reposition the hotel as a businessman’s preference with eco- tourism potential.
The shareholders now with notable holdings in the hotel are Muneshwer’s, Resaul Maraj & Company and Hemraj Singh. There are a number of other new smaller shareholders including R L Singh and Ashoka Singh of Canada. Some of the small shareholders who were originally with the hotel have stayed on.
Richard Humphrey, with 60% ownership of the hotel and the former managing director, opted to sell his shares, which were diluted in the transaction in a three for five-share split.
The June 6 equity transaction saw a restructuring of the US$2M debt incurred by the Hotel Tower between 1992-8 with the Bank of Nova Scotia. This debt saw the crippling of the hotel a few years ago and sent it into receivership.
The recent agreement was reached between the new investors and the receiver/ manager Christopher Ram, the Bank and the old Board of Directors representing the shareholders. The Bank agreed to write off a substantial part of the interest accrued on the US$2M debt and to further extend a line of credit to the new investors to turn the hotel around. The investors in return had to pay off a part of the outstanding principal owing to the Bank.
According to new director R L Singh, who is overseeing the hotel’s operations until it is put on an even keel, new shares were issued by the hotel in the transaction to raise capital to pay off a part of the debt and the old share capital of 25M shares were diluted in a 3/5 split to arrive at a new share capital of 15M shares.
In the process, 50M new shares were issued at $5 each and were taken up by the new investors and an offer of $3 per share was made to shareholders holding the 15M old shares. An average seventy- five per cent of these shares were sold to the investors with Humphrey, who held 60% of these shares, also opting to sell. The transaction would have cost the investors $283.7M (US$1.4M) at the quoted prices.
Singh, the retired chief executive officer of T Geddes Grant Guyana Limited, would not say how much was extended by the Bank in the Line of Credit, nor would he say how much of the US$2M debt was paid off.
However, he said the investment was made after nine months of negotiations with the parties and demonstrated a lot of confidence in the government and the country. The old board comprising David King, John G Carpenter, Kenneth DeAbreu and Richard Humphrey and attorney Joseph King resigned on June 6. Singh, Amarnauth Muneshwer and Ashoka Singh as well as attorney Edward Luckoo were appointed the new directors.
“We are in the process of preparing a strategic plan to take the hotel forward and our focus would be on marketing,” Singh told Stabroek News.
The line of credit, Singh said, would be used to complete the refurbishing of the 78-room hotel of which 69 rooms are already complete. Some of the existing rooms would be upgraded and the Spectrum (the bar, restaurant and poolside) and Black Magic Bar would also be upgraded. Some of the money would also be spent on the Emerald Tower Rainforest Resort at Madewini. Singh said an analysis of the industry’s room rates would be conducted to ensure that the hotel’s rates are competitive.
Attorney and advisor to the investor group, Winston Murray, said special packages would be put together to encourage locals to use the facilities of the hotel. He said Emerald Tower resort would be marketed as a destination away from the city to explore nature and natural life. The aim is to create linkages with other tourist destinations in the region to market the resort.
“We believe Hotel Tower can return to the premier position it once held in Guyana. To achieve that, we realise the quality of service would be pivotal and we would have to engage in a structured programme of training the staff and determine special rates for corporate clients as well as establish linkages with sister hotels, travel agents and tour operators at international destinations.”
Mohamed Bandoo, corporate secretary and manager of the hotel, said that the Caricom Secretariat and government ministries had continued to be strong supporters of the hotel, which had been operating at losses in the last few years.
The hotel has been operating at an average monthly occupancy level of between 25-45% when it had once commanded 60% of the market. Singh said the aim was to bring the occupancy level up to an average 60% in two years to allow the hotel to break even.
Cutting costs would also be looked at while the hotel reaches out to corporate institutions to offer its services.
The investors do not believe that the road ahead for the hotel would be easy and that much hard work and dedication would have to be laboured into the project. However, they believe their confidence is not misplaced and their investment is seen as a calculated risk given the recent political postures, which suggests longer-term political stability.
Hotel Tower ran into difficulties in the 1990s as it invested too heavily with the aim of making a five-star hotel. The investment decision was taken when the economy was booming but the momentum was not maintained and the occupancy level fell in the face of political turmoil.
As a result, the lack of returns did not allow for money to be reinvested as it was diverted to paying crippling debt.