Pakistan dumps more money on deadweights: govt may okay $125m for Roosevelt

[Falcon26]

PTI govt may okay $125m for Roosevelt
Financing needed to lift New York hotel out of debt trap, secure its assets

PHOTO: Roosevelt Hotel Website

ISLAMABAD:
The Economic Coordination Committee (ECC) of the cabinet, which is scheduled to meet on Wednesday, is expected to approve funding of $125 million to enable Pakistan International Airlines Investments Limited (PIAIL) to rescue Roosevelt Hotel that has fallen into a debt trap and its assets are at risk.

Sources told The Express Tribune that the PIAIL chairman, in its letter sent on August 4, 2020, informed the Aviation Division that the financial health of PIA Corporation Limited (PIACL) neither permitted repayment of $50 million to PlAIL in the near future nor could it borrow any funds on account of a lack of cash flow and already pledged assets.

Therefore, according to the letter, the government of Pakistan has been requested to provide a financing of $125 million urgently, enabling them to secure PIAIL’s most valuable asset.

The Aviation Division had earlier informed the economic decision-making body that in the backdrop of Covid-19 pandemic, the hotel industry had been severely impacted across the globe. PlAIL-owned Roosevelt Hotel in Manhattan, New York has also experienced extreme cash flow constraints since March 2020.

The PIAIL chairman has provided detailed information in this regard pertaining to financial challenges being faced in running Roosevelt Hotel, potential source of funds, union issues, future outlook and board’s decision for government’s consideration and action.

The ECC was informed that even partial operations of the hotel were not sustainable at the moment. Roosevelt Hotel had acquired a loan of $105 million from JP Morgan at an interest rate of 5.05% with maturity in April 2021. Annual interest payment had been calculated at approximately $6 million.

JP Morgan later sold its loan of $68.25 million to MSD PCOF Partners. The sale of the loan complicated the situation for Roosevelt Hotel due to certain reasons.

For the past several years, MSD has been expressing its desire to be a joint venture partner in the development of Roosevelt Hotel’s site. MSD may attempt to leverage its position in achieving the goal. It also holds air rights in the vicinity of Roosevelt.

The PIAIL management was of the opinion that MSD had acquired the major portion of Roosevelt loan - by design - in order to become the sole lender and in case of default, it could quickly step in and seek foreclosure.

The matter was considered by the Roosevelt board in its emergency meeting held on July 3, 2020. It decided that the government of Pakistan should be apprised of the facts and its recommendations should be sent for the government’s consideration.

It proposed that Roosevelt’s operations should be shut down and all union and non-union employees be laid off against severance payment of approximately $20 million.

The board said the current debt of $105 million secured against property mortgage and with PIAIL’s guarantee should be paid forthwith.

It insisted that the $105-million debt and the cost of severance, if any, were Roosevelt’s liabilities and responsibilities, which needed to be paid/retained irrespective of whether the hotel was closed or remained operational.

In the backdrop of the current situation, a meeting was chaired by Adviser to Prime Minister on Finance Abdul Hafeez Shaikh on July 9, 2020 via video link where ministers for aviation and privatisation, Privatisation Commission secretary and senior officers of the Aviation Division and PIAIL participated.

It was decided that based on Roosevelt board’s recommendations, the Aviation Division and the Ministry of Privatisation would submit a joint summary to the ECC for its consideration.

https://tribune.com.pk/story/2259094/pti-govt-may-okay-125m-for-roosevelt?amp=1

 

[Pakistansdefender]

Pakistanis wanted it. Majority is authority.
You can sale pia and steel mill.
But you can die and not sale thia hotel. Its a matter of national pride.
But a good management and after covid, and new management, it would pay itself back

 

[Ghazwa-e-Hind]

Pakistanis wanted it. Majority is authority.
You can sale pia and steel mill.
But you can die and not sale thia hotel. Its a matter of national pride.
But a good management and after covid, and new management, it would pay itself back

Bas kardo bhai, 'national pride'

Behind every move there is a bureacrate making billions of rupees in comissions.

Everyone who gets chance, robs the national exchequer with both hands.

Corona virus was starter, the real dish will soon be served by nature, don't worry.

 

[Falcon26]

Pakistanis wanted it. Majority is authority.
You can sale pia and steel mill.
But you can die and not sale thia hotel. Its a matter of national pride.
But a good management and after covid, and new management, it would pay itself back

What do they say about dangerous pride?

Pakistan should spend the $125 million and the billions others it spends on state owned enterprises that are in default on human development and within 10 years, you will see real transformation.

 

[ps3linux]

Roosevelt Hotel had acquired a loan of $105 million from JP Morgan at an interest rate of 5.05% with maturity in April 2021. Annual interest payment had been calculated at approximately $6 million.

JP Morgan later sold its loan of $68.25 million to MSD PCOF Partners. The sale of the loan complicated the situation for Roosevelt Hotel due to certain reasons.

For the past several years, MSD has been expressing its desire to be a joint venture partner in the development of Roosevelt Hotel’s site. MSD may attempt to leverage its position in achieving the goal. It also holds air rights in the vicinity of Roosevelt.

The PIAIL management was of the opinion that MSD had acquired the major portion of Roosevelt loan - by design - in order to become the sole lender and in case of default, it could quickly step in and seek foreclosure.

The entire deal is extremely fishy MSD Partners were not too far from my office in Manhattan, I know who they are and what they are capable of. I am still scratching my head as to why the management borrowed from JP Morgan (with more than desired Indians working there) notoriously known to act as front-man to other groups like MSD, and many vulture capitalist (I know what venture capitalist firms are). There seems to be a plot here instead of acquiring loan from a commercial bank JP was approached, instead of receivables or cash flows fixed assets were pledged despite knowing that MSD Group has been after the hostile takeover of this hotel. The interest rate seems stupid when the fed rate is close to zero.

It proposed that Roosevelt’s operations should be shut down and all union and non-union employees be laid off against severance payment of approximately $20 million.

The board said the current debt of $105 million secured against property mortgage and with PIAIL’s guarantee should be paid forthwith.

It insisted that the $105-million debt and the cost of severance, if any, were Roosevelt’s liabilities and responsibilities, which needed to be paid/retained irrespective of whether the hotel was closed or remained operational.

Now for people in Pakistan Roosevelt is just a name, it has never been mentioned how PIA got it, where it is located what is the strategic and business potential of this hotel, how far is it from United Nations New York office, how far is it from the financial capital of the world. Such a pity due to bas**ds and filth hired by political parties such a historic hotel located at a unique location is almost gone.

I am truly heartbroken.

@Mangus Ortus Novem , @Verve , @The Accountant , @The Eagle , @ARMalik , @graphican

 

[ARMalik]

The entire deal is extremely fishy MSD Partners were not too far from my office in Manhattan, I know who they are and what they are capable of. I am still scratching my head as to why the management borrowed from JP Morgan (with more than desired Indians working there) notoriously known to act as front-man to other groups like MSD, and many vulture capitalist (I know what venture capitalist firms are). There seems to be a plot here instead of acquiring loan from a commercial bank JP was approached, instead of receivables or cash flows fixed assets were pledged despite knowing that MSD Group has been after the hostile takeover of this hotel. The interest rate seems stupid when the fed rate is close to zero.



Now for people in Pakistan Roosevelt is just a name, it has never been mentioned how PIA got it, where it is located what is the strategic and business potential of this hotel, how far is it from United Nations New York office, how far is it from the financial capital of the world. Such a pity due to bas**ds and filth hired by political parties such a historic hotel located at a unique location is almost gone.

I am truly heartbroken.

@Mangus Ortus Novem , @Verve , @The Accountant , @The Eagle , @ARMalik , @graphican

I am with you. This is just such a terrible decision, and very fishy no doubt. It has corruption written all over it. Day by day, my suspicion of IK being involved in corruption himself getting firmer. It is not the job of governments to run hotel. Just sell it at a good price, and use the money for something better.

 

[ps3linux]

I am with you. This is just such a terrible decision, and very fishy no doubt. It has corruption written all over it. Day by day, my suspicion of IK being involved in corruption himself getting firmer. It is not the job of governments to run hotel. Just sell it at a good price, and use the money for something better.

Principally I agree with you sir but this building is a beacon, a flagship why is it that every business operated by Pakistani corrupt and incompetent bureaucrats and their political masters is screwed.

Temasek holdings (singapore) was based upon NIT Pakistan's model NIT is a sh*t*ole doing only asset management it was supposed to be a sovereign fund, barely managing $600 million, while Temaseck is a true sovereign fund managing every thing from airline to power to telecom to finance, successfully I must say. The other example is Abu Dhabi Sovereign fund.

 

[Trango Towers]

Pakistani safarshis couldn't run to the toilet let alone an airline or a 5 star hotel

 

[ARMalik]

Principally I agree with you sir but this building is a beacon, a flagship why is it that every business operated by Pakistani corrupt and incompetent bureaucrats and their political masters is screwed.

Temasek holdings (singapore) was based upon NIT Pakistan's model NIT is a sh*t*ole doing only asset management it was supposed to be a sovereign fund, barely managing $600 million, while Temaseck is a true sovereign fund managing every thing from airline to power to telecom to finance, successfully I must say. The other example is Abu Dhabi Sovereign fund.

Yes indeed. Apparently, Trump and Co. were/are interested in buying this. With Asset prices skyrocketing, it wouldn't be such a bad idea to sell it, and use the money to establish a Sovereign Fund. It is only a matter of time when the US economy will see a downturn specially if Biden wins. Use the money to buy distressed assets in US and there will be plenty of them.

 

[ps3linux]

Yes indeed. Apparently, Trump and Co. were/are interested in buying this. With Asset prices skyrocketing, it wouldn't be such a bad idea to sell it, and use the money to establish a Sovereign Fund. It is only a matter of time when the US economy will see a downturn specially if Biden wins. Use the money to buy distressed assets in US and there will be plenty of them.

Sir jee its a few blocks away from UN office, wall street and unfortunately few blocks away from Trump Towers as well. It has never been in loss except for last few years, Shouket Aziz wanted to buy it, Ghaddari wanted to buy it, some Saudi front man wants to buy it so does Trump.

 

[maithil]

https://twitter.com/x/status/1293418945136013312

https://twitter.com/x/status/1293418954816475137

https://twitter.com/x/status/1293418968410193921

https://twitter.com/x/status/1293418972789059588

 

[graphican]

The entire deal is extremely fishy MSD Partners were not too far from my office in Manhattan, I know who they are and what they are capable of. I am still scratching my head as to why the management borrowed from JP Morgan (with more than desired Indians working there) notoriously known to act as front-man to other groups like MSD, and many vulture capitalist (I know what venture capitalist firms are). There seems to be a plot here instead of acquiring loan from a commercial bank JP was approached, instead of receivables or cash flows fixed assets were pledged despite knowing that MSD Group has been after the hostile takeover of this hotel. The interest rate seems stupid when the fed rate is close to zero.



Now for people in Pakistan Roosevelt is just a name, it has never been mentioned how PIA got it, where it is located what is the strategic and business potential of this hotel, how far is it from United Nations New York office, how far is it from the financial capital of the world. Such a pity due to bas**ds and filth hired by political parties such a historic hotel located at a unique location is almost gone.

I am truly heartbroken.

@Mangus Ortus Novem , @Verve , @The Accountant , @The Eagle , @ARMalik , @graphican

@ps3linux,

It is not a tragedy that crimes happen, the tragedy is that criminals are not punished after crimes. People who took loans with criminal intents and despite they being near, we will not punish them and excuse is they were being asked by the political leadership in Pakistan to do what they did.

Allah has a beautiful rule in this regard and that is everyone involved in a crime is a criminal and "I was forced to do" is not an acceptable excuse. If higher-ups (political leadership) cannot be proven to be involved, the people on the ground who executed, signed and contracted criminal loans should be punished straight for the crime they are proven to be involved in, and then we will have a reason to be hopeful that in the future "executes" will fear and deny to be used by the political scums.

When there are matters which "truly involve us", we do not leave it to others. When our family is at risk, we do not leave it to the police to protect and step forward ourselves. National defence is the same that in case of war, everyone (not just soldier) is at war.

We need to elevate the ownership and value of such assets in the public. We need to bring this matter close to people's hearts, so they start acting as they acting matters related to their family. Social media can help, but its a long road. A continued effort over a few years will be needed. Is that a big asking? Yes. Will it bring a big reward? Yes.

 

[AZADPAKISTAN2009]

I believe workers of Rosavelt Hotel should go to Social Security Assistance in USA , why is Pakistan paying their salaries ?

Temporarily layoff the staff and USA's social security will cough up the bill

They deduct taxes for this insurance on every pay check from workers

 

[valkyr_96]

The entire deal is extremely fishy MSD Partners were not too far from my office in Manhattan, I know who they are and what they are capable of. I am still scratching my head as to why the management borrowed from JP Morgan (with more than desired Indians working there) notoriously known to act as front-man to other groups like MSD, and many vulture capitalist (I know what venture capitalist firms are). There seems to be a plot here instead of acquiring loan from a commercial bank JP was approached, instead of receivables or cash flows fixed assets were pledged despite knowing that MSD Group has been after the hostile takeover of this hotel. The interest rate seems stupid when the fed rate is close to zero.



Now for people in Pakistan Roosevelt is just a name, it has never been mentioned how PIA got it, where it is located what is the strategic and business potential of this hotel, how far is it from United Nations New York office, how far is it from the financial capital of the world. Such a pity due to bas**ds and filth hired by political parties such a historic hotel located at a unique location is almost gone.

I am truly heartbroken.

@Mangus Ortus Novem , @Verve , @The Accountant , @The Eagle , @ARMalik , @graphican

Even though this issue has come to pass I am curious to know what part did you find fishy? That the hotel management chose financing from JP Morgan or that JP Morgan sold the loan to MSD Partners? There is nothing wrong in both the instances, even though MSD Partners may have in fact bought out the loan expecting (more like hoping) Pakistan to default(what?! - Pakistan just like any other client can take a loan from any other vendor and pay off MSD and move on away from their books)

There is nothing wrong with the recourse -as is standard, cash is collected in a servicing account and a charge is made on fixed assets. For your comfort:

Note 23.16 On May 09, 2014, RHC refinanced its existing loans and entered into a new loan agreement with Wells Fargo Banks, N.A., increasing its borrowings to US $ 140 million. The proceeds of this loan were used to satisfy the previously existing loans (i.e. which were obtained on November 09, 2011). This loan was to be matured on May 09, 2018 and was secured by amongst other things RHC's property and equipment and required payments of interest only at the annual rate of LIBOR plus 2.40%. (2017: 3.65%). The loan agreement contains covenants that RHC must adhere to which includes, among other things, the maintenance of cash in escrow reserved towards the payment of interest, real estate taxes and insurance.

On April 09, 2018, RHC refinanced its existing loan with Wells Fargo Banks N.A. (Wells Fargo) and entered into a new loan agreement with GP Morgan Chase in the amount of US $ 105 million. The proceed of the loan were used to partially repay the US $ 140 million loan payable. The repayment of the remaining balance was funded by RHC's cash in banks and collection of the outstanding note receivable from the partner. The loan has the maturity date of April 09, 2020, with separate extension options for two one year periods at the option of RHC, subject to the satisfaction of the extension conditions as defined.

The loan is secured by, among other things. RHC Operating LLC's property and equipment and requires payments of interest only at the monthly rate of LIBOR plus 3.90% (6.36% at 31 December 2018).The loan agreement contains covenants that must be adhered to which includes. among other things the maintenance of cash in escrow reserved towards payment of interest, real estate taxes and insurance. The loan covenants are effective beginning on the loan's first anniversary. At December 31, 2019, although not required RHC Operating LLC was in compliance with all of its loan covenants.

RHC Operating LLC entered into an interest rate cap agreement on its loan with the intent to manage interest rate exposure. This interest rate cap agreement. with an aggregate notional amount of $105,000.000,expires on 9 April 2020, which caps the variable rate portion of the debt at a rate of 3.50% per annum. The cost of the interest rate cap was $90,000. The Group considers the risk of non-performance on this agreement to be remote.Management has determined the cost of this derivative as at 31 December 2019 approximates its fair value.

JP Morgan is a universal bank and thus provide complete wholesale service -debt/equity/advisory/underwriting etc. Even for a loan the inherent risk/size etc. (and whose client it is?) will decide where the loan will originate from and then where it will be parked.

There is nothing wrong with the interest rate - it is 1MLibor + 3.9% 1MLibor is 0.16% vs 2.2 an year ago. So currently the rate is much lower than previous years but obviously the business is also affected as well due to the pandemic.

 

[valkyr_96]

https://twitter.com/x/status/1293418945136013312

https://twitter.com/x/status/1293418954816475137

https://twitter.com/x/status/1293418968410193921

https://twitter.com/x/status/1293418972789059588

Keep up with your nonsense. The flags look good on you. Maybe learn some finance or better get a real job -at a bank. Just for your education the loan was originally Wells Fargo's and it was refinanced by JPMChaseBank. This news is only worth mentioning because MSD acquired the loan and is also interested in the property. The author of the tweets is wrong MSD cannot ask unilaterally impose an interest rate of its choosing because Pakistan could have sought to refinance it from another vendor. It chose to seek GOP's help because of Covid cashflows have dried up and it is unclear when operating will restart.