* i. ORIGINS OF THE INVOLVEMENT:
ACQUISITION OF LABADI BEACH HOTEL AND STAR HOTEL BY INTERNATIONAL GENERICS LIMITED.
In 1993, the Divestiture Implementation Committee (DIC) sold the Star Hotel and the Labadi Pleasure Beach Hotel at a total cost of one million five hundred thousand US dollars (US$ 1.5 m) to International Generics (IG). A total of one million US dollars was paid in advance; the balance of five hundred million dollars is still outstanding according to the DIC, the settlement of the balance depends on the resolution of an issue about the dimensions of the parcels of land on which the hotels stand.
Subsequently, IG requested the government for assistance to develop the two hotels. The government contracted two loans from the Bank of Scotland under the Export-Credit Guarantee Department of the UK Ministry of Trade. In August 1994, the Government concluded two loan agreements with IG and the Rexol Group B.V. for a total of twenty two million pounds sterling (£22,000,000). £11,305,000,00 for La Palm Ltd. (the company which took over the Labadi Beach Hotel).
In July 1995, the Government entered into two further loan agreements totaling nine million six hundred thousand pounds sterling (£9,600,000) with the Bank of Scotland. The Government then lent the money to Coco Palm Ltd and La Palm Ltd, (£4,461,550 and £5,138,450.00 for Coco Palm and La Palm respectively).
THE TOTAL THUS LENT TO THE TWO COMPANIES BECAME THIRTY-TWO MILLION POUNDS STERLING (£32,000,000). VARIOUS DEEDS WERE EXECUTED TO SECURE THE LOANS.
In January 1996, the Ministry of Finance (MOF) requested the National Investment Bank (NIB) to join a consortium of banks to repay off the loan to the Bank of Scotland. The MOF’s reason for this request was that the Government wanted a reduction in the outstanding balance on the ECGD facilities granted to Ghana to facilitate the grant of further loans.
The request to the NIB was made on behalf of the MOF by Dr. George Yankey, the representative of the Ministry of Finance on the Board of the NIB. The paper Dr. Yankey presented to the board in support of the request entitled. “BRIEF ON THE LOAN OF £32 MILLION ON-LENT TO LA PALM AND COCO PALM HOTELS AND GUARANTEED BY REXOL GROUP BV. AND INTERNATIONAL GENERICS COMPANY LIMITED” gave the impression that the NIB would not be financially prejudiced if the request was granted since
there would be no problem of Coco Palm and La Palm not paying off the debts to the Bank of Scotland. This impression was conveyed by the following paragraphs in Dr. Yankey’s paper to the Board:
“It is worthy to note that on November 22 1995 Bank of Scotland wrote to inform the Ministry that Coco Palm Limited and La Palm Limited had indicated their willingness to repay off on behalf of Government, the loans of £15,766,,550 and £16,233,450 respectively contracted by Government and on-lent to them.
In a response to a letter from this Ministry, the two companies confirmed their willingness to repay the total indebtedness under the above Agreement and appears to be making arrangements in that respect”.
Yankey stated that the request to the NIB was for:
that
“the Bank of Ghana has agreed to issue in favour of NIB a guarantee to enable it to raise the sum of £36.4 million …
Yankey, the representative of the MOF on the NIB Board, was here indirectly telling the Board that the Government had got the Bank of Ghana to guarantee the loan in advance and so they had nothing to worry about. In fact, Yankey’s request to the Board was not so indirect. His paper stated quite clearly that:
“To ensure the continuation and smooth developments of the projects and to forestall any cash flow difficulty following from the prepayment of the loans Coco Palm Limited and La Palm Limited have applied to the National Investment Bank (NIB) for a facility. While NIB is willing to provide the facility it will need the support of the Bank of Ghana to mobilize the required foreign currency”
The NIB could not get a consortium of state owned banks to make up the thirty two million pounds sterling (£32 million) target. Only the Ghana Commercial Bank agreed to join in.
In February 1996, the NIB Management approved a facility of two million, seven hundred and eleven thousand, eight hundred and forty-seven pounds sterling (£2,711,847) to the two companies; (Coco Palm, £1,919,491.43, La Palm £792,355,76). The NIB also gave an overdraft facility of one hundred and fifty million cedis (¢150 million) to each of the Companies in the same month. The loan of £2,711.847 which the NIB lent to the two companies was obtained by the NIB as a loan from their corresponding bank in Germany, BHF Bank. To obtain this loan the NIB pledged their fixed deposit held in foreign banks as follows:
- BHF Frankfurt
- Citibank, London
- BHF, London
- BHF, London
- US$ 411,133,25
- US$
855,064,76 - GBP
1,160,306,57 - DM
1,469,557,90
The two companies defaulted in the repayment of the loans. In November 1998, the total debit balance on the foreign currency loans was (£2,823,747.66). The debit balance on the cedi overdraft of <300m to the two companies was ¢697,492,366.42.
In November 1998 the Bank of Ghana wrote to the Ministry of Finance showing concern about the default of the companies. Yankey replied to the Deputy Governor in these words:
“… efforts are being made to support the companies to complete their respective projects to enable them to fulfil their repayment obligation to the National Investment Bank (NIB). Meanwhile the Ministry will request the Central Bank to renew the guarantees it issued to cover the facilities owned to NIB”.
In May 1999, the MD of the NIB wrote to the MOF demanding a total of £3,153,579,09 in repayment as the balance outstanding on the loans. The MOF replied per Kwame Peprah by a letter to the Controller and Accountant General requesting the controller to pay the cedi equivalent of £788,439,75 into the NIB account with the bank of Ghana. This payment was to be charged to “expenditure for Coco Palm and La Palm Beach Hotel Limited respectively.” This part – repayment of the loan from the NIB to the Coco Palm and La Palm is the only repayment effort so far. (The repayment by the MOF is itself the subject for investigations and also the Guarantee by the Bank of Ghana). As at June 2002 the foreign currency indebtedness of La Palm to the NIB was £1,097,708,22 and that of Coco Palm was £2,529,589,77. The cedi debt for both companies was a total of the billion, five hundred and ninety-three million, sixty thousand cedis (€1,593,060,000.49).
• ii. SSNIT’S MERGER WITH LA PALM, BIRTH OF GOLDEN BEACH HOTELS In March 1999, when La Palm’s indebtedness to the NIB stood at over two million pounds sterling (£2 million) and three hundred and fifty seven million cedis (357 million), the SSNIT Board approved a guarantee for a five million US dollars loan (US$ 55 million) being granted by Merchant Bank to La Palm. According to Mr. Charles Asare, then DG of SSNIT, the Government had approached SSNIT to assist La Palm to complete a section of the La Palm Hotel to enable the Government host the Africa-America Summit Conference in June 1992.
SSNIT agreed to the guarantee on condition that the La Palm Hotel, which according to Charles Asare was worth twenty five million Us dollars ($25 million) at the time, would be pledged as security, and La Palm would execute an MOU agreement which would give SSNIT the option to merge its Busua Beach and Elmina Beach Hotels with La Palm, if SSNIT so wished.
SSNIT in due course began to explore the viability of a merger with La Palm and soon decided to enter the merger which was consummated in September 1999 but given retrospective effort from June 1999. According to Charles Asare the date was set back.
“to insulate SSNIT from debt unilaterally incurred by Rexol/La Palm during the period leading up to the consummation of the merger”.
The merged entity was called Golden Beach Hotels Ltd.
* Editor’s Note: To Be Continued In Next Edition)
