Nairametrics|In what may come as a shock to many observers, Skye Bank has obtained an order from a Federal High Court in Lagos to take over Intercontinental Hotel.
Here is what we know about the court order:
- Skye Bank took the owners of the hotel, Milan Industries Limited to court over an alleged debt.
- The bank claims to have lent Milan Industries, $29.8 million and N3.8 billion to build the hotel.
- In addition, the bank also lent the company N500 million as overdraft.
- Milan industries has allegedly refused to pay both the loan and interest accruing.
- The company has also failed to meet repayment plans for both the loan and interest outstanding.
- The court order gives Skye bank authority to take over ALL assets of Milan Industries Limited including Intercontinental Hotel.
- The hotel owners are yet to issue a press statement.
Intercontinental Hotel Lagos was opened in September 2013 at the peak of a booming hotel market in Lagos. Upon its grand opening as arguably the single largest hotel in Lagos by rooms and facilities, experts noted that the fact that the hotel had been under construction for almost a decade posses several operational risks.
They opine that he average cost per room of over a million naira at the time, making it hugely unlikely that it will ever breakeven.
Things got worse for the hospitality industry in 2014-2016, as combination of a crash in oil prices, the Ebola crisis, uncertainty of the 2015 election, and the ensuing recession, sent occupancy and average room rates crashing.
The sudden depreciation of the Naira against the dollar may have also led to a spike in operating costs. The slowdown in economic activities, and competition from nearby hotels would have prevented the hotel from passing on the increased costs to its customers.
Aside the hospitality arm, Milan groups other operations are also fx dependent, so the increase in cost cut across the group. The hotel which opened in September 2013, may have been unable to recover its profits due to unforseen events such as the Ebola crisis and the 2015 elections which saw a slowdown in economic activities.
Skye Bank Under pressure
While the move may seem harsh, Skye Bank may have embarked on the order as a last resort. The drop in crude oil prices and resulting recession in the country has led to an increase in non performing loans for most banks in the country. The Central Bank of Nigeria (CBN) in 2016 ordered the removal of the bank’s MD Timothy Oguntayo and Chairman Fola Ayeni over alleged poor risk management practices, that led to an increase in non-performing loans.
It then appointed Mohammed Ahmad as chairman and Tokunbo Abiru as MD. The CBN based its action, on inability of the bank to meet liquidity and prudential requirements. The new management was also given a deadline to recapitalize the bank.
Skye Bank is the only listed bank yet to release its audited financial statements for the year ended 2016, and first quarter 2017 results. The move to recover bad loans will help the bank meet capitalization and liquidity requirements.
Milan group is a conglomerate with operations spanning across Africa, Dubai and Geneva. Areas of operation include Shipping, Transport and Real Estate. It has been in existence for over 40 years.