Roosevelt Hotel: Govt for putting a cap on recurring liabilities

ISLAMABAD: The Aviation Division is said to have been directed by the Federal Cabinet to formulate a viable future plan of Roosevelt Hotel, New York, aimed at putting a cap on recurring liabilities, well-informed sources told Business Recorder.

On June 16, 2021, Aviation Division, the administrative head of Pakistan International Airlines Company Limited (PIACL), placed the following recommendations for consideration: (i) financial support of US $ 17.3 million to PIA-IL for payment of recurring as well as one-off liabilities in respect of Roosevelt Hotel, New York as verified by the Auditor and recommended by PIA-IL Board; (ii) direction to Finance Division to decide appropriate mode of financing of US $ 13 million already approved by ECC for Roosevelt Hotel New York; (iii) inform the Federal Cabinet that the future of Roosevelt Hotel needs prompt decision so as to avoid ongoing loss to public exchequer; and (iv) approval of Terms of Reference (ToRs) of the committee prepared by Aviation Division.

During a discussion, Chairman Board of Investment, Atif Bukhari (who has since resigned) pointed out that there must be some capping on funding relating to security and insurance costs being spent on Roosevelt Hotel otherwise recurring liabilities will continue to mount. Aviation Division clarified that the ECC in its meeting held on September, 02, 2020 approved the recommendations of the committee headed by the Deputy Chairman Planning Commission and comprising Secretaries, Finance, Aviation and Law & Justice Divisions constituted to deliberate on financial and legal implications on the issue.

Accordingly the recommendation of the Committee regarding requirement of US $ 142 million and US$ 13 minion per annum as carrying cost was approved till such a time as GoP finalizes lease/JV of Roosevelt Hotel site which did not include markup of US $ 59 million.

It was also noted that the Finance Division arranged US $ 142 million as a loan from National Bank of Pakistan with markup of US $ 5.9 million per annum. However, the mode of financing of US$ 142 million was not finalized.

Finance Minister endorsed the views of Chairman BoI and observed that the Aviation Division must formulate recommendations for a permanent solution of the Roosevelt Hotel in order to forestall the recurring liability for the Government of Pakistan.

Early this year, Managing Director, PIA-IL, in his presentation to a Committee headed by Deputy Chairman Planning Commission stated that the additional funds required will be $ 36.173 million as of December 31, 2021 - annual carrying cost plus hotel's liabilities of $ 27.613 million, incremental pension fund withdrawal liability projected at $ 6.560 million and estimated legal cost for litigation $ 2 million.

The MD, PIA-IL further added that the requirement of $ 36.173 million has been worked out on the basis of GoP providing these funds as a grant in aid. In case, the additional requirement of $ 36.173 million is arranged through a loan then the requirement will increase further from $ 36.173 million to $39.565 million after inclusion of $ 3.392 million cost of debt of $ 36.173 million per annum.

The MD, PIA-IL further stated that US $ 18 million already approved by ECC is available with National Bank of Pakistan which is yet to be paid as pension liability to the employees in March 2021. He proposed that the urgent nature of liabilities (pensions) amounting to $ 7.754 million may be allowed to draw from the available amount of $ 18 million, adding that $ 7.754 million would be replenished into the Pension Fund account on disbursement of additional funds by GoP which are required for payment of the first installment of Pension Fund withdrawal liability .

Total payments already made by Roosevelt were $ 7 million, of which $ 4,854,919 was due on account of real estate taxes, $ 1,684,114 property insurance, $ 180,000 salaries and wages and $ 280,967 other expenses.

The ECC in its meeting held on June 16, 2021 discussed the entire issue of Roosevelt Hotel and decided that the Aviation Division should consult Finance Division regarding the mode of financing separately and formulate recommendations for the ECC.

It was also decided that Aviation Division will formulate a viable future plan about the Roosevelt Hotel after consultation with relevant stakeholders and place it before the CCoP. After consideration of the plan by the CCoP, it should be placed before the ECC within 30 days.

Copyright Business Recorder, 2021