US firm drags Roosevelt Hotel into debt trap
Aftab Ahmed
Islamabad: A New York-based Investment firm MSD has dragged PIA-owned Roosevelt Hotel in Manhattan, New York, into a debt trap by design to acquire it.
MSD Partners is an SEC-registered investment adviser that utilizes an investment strategy focused on maximizing long-term capital appreciation.
Sources told Newztodays.com that Roosevelt Hotel Corporation has obtained a loan of US$ 105 million from JP Morgan (lenders) at an interest rate of 5.05 percent with maturity in April 2021. The annual interest payment is USS 6.0 million approximately.
However, JP Morgan has sold its loan of US$ 68.250 million to MSD PCOF Partners XXI, LLC (MSD). The selling of JP Morgan’s portion of the loan to MSD has further complicated the situation for Roosevelt Hotel Corporation due to some reasons.
For the past several years, MSD has been expressing its desire to be a JV partner in the Roosevelt Site development. MSD as a lender may attempt to leverage its position in achieving its ultimate goal. MSD is also the owner of the Air Rights in Roosevelt’s.
Given this position, PIA-IL management thinks that MSD has acquired the major portion of the Roosevelt loan (by design) to become the sole lender. In case of a possible default, it could quickly step in and seek a foreclosure.
This hotel has also been listed on the list of sick units owned by the Pakistan government that is trapped into around $100 million debt now.
So, this is why the PTI government believes that it should be leased out or operate on a joint venture basis to turn this loss-making hotel asset into profit-making. Being under debt, Aviation Division is pushing the government for the early disposal of this hotel.
The government has also ruled out selling off the hotel, saying that this hotel was running in loss, and its losses had been swelled to around $100 million. Keeping in view this, the government was working on different options to turn around this loss-making asset.
A joint venture was one of the options that the government was following to turn this loss-making asset into profit-making.
Earlier, a special meeting of the cabinet committee on privatization was called for the early disposal of the New York Roosevelt Hotel owned by Pakistan International Airlines-Investment Limited (PIA-IL).
Aviation Division had raised the early disposal of Roosevelt Hotel before Prime Minister Imran Khan on several occasions. In the meeting chaired by the Prime Minister on the Restructuring of PIACL, it was directed that Aviation Division shall submit present its proposal for JV / long term lease of Roosevelt Hotel before the CCoP for its consideration within one week.
The Prime Minister, in another meeting held on June 19, 2020, directed that as part of the PIA financial restructuring plan, Aviation Division, in consultation with Privatization Division, shall submit and present its proposal, for revision of the constitution of Taskforce for Privatization of Roosevelt Hotel, owned by PIA-L, before the CCoP to review its decision taken in November 2019 duly ratified vide Cabinet’s decision in December 2019 whereby the said task force was constituted.
Aviation Division had pointed out during the meeting of CCoP that they had not been consulted in the matter. The Federal Cabinet in December 2019 ratified this decision of the CCOP with the direction that MD, PIA-L shall be included in the Task Force.
