HDL pays Rs 1 billion off its Government loan

For the fist time in its history, Hotel Developers (Lanka) PLC (HDL), the owning Company of Hilton Colombo, has last week paid Rs. 1 billion to the Treasury as part settlement of a longstanding loan from the Government.

The cheque was handed over to Dr. P.B. Jayasundera, the Secretary to the Treasury, Ministry of Finance and Planning.

HDL Chairman Thirukumar Nadesan

HDL ChairmanThirukumar Nadesan told that within a period of 24 months, the company has managed to turnaround its negative position into a positive one, recording Rs. 712 million unaudited profit after interest and tax at the conclusion of the financial year on 31st March 2013 from Rs. 958 million loss in 2012.

This became possible as a result of the Balance Sheet Restructuring Programme initiated by the Company with the support of the Government involving conversion of 80% loan into equity which brought about a saving of Rs. 1,100 million by way of interest and the HDL’s success in negotiating a new Management Agreement with Hilton International Management Corporation, where the total management fees payable to its operator Hilton Worldwide was brought down to 11.75% from 33% which was a significant milestone in the turnaround, which guaranteed a contribution to the profitability of around Rs. 250 million annually.

Despite initial criticism, Expropriation Act which acquired the Underperforming and Underutilized Assets, the move was a successful one, Nadesan said, pointing out that this was a key reason for the Company’s turnaround.

“There was a lot of criticism at the time it was brought in,” he acknowledged. “We were the only Company vested by the Government under the said Act, while all others were assets. Within a period of two years, we have been able to revitalize the Company and show much better performance than expected. Hence the repayment of Rs. 1 billion.”

Nadesan expressed appreciation to the Government’s post war revival of tourism which has lured in increasing number of tourists to the country improving the occupancy rates of the hotel. With the hope of assisting the state in its tourism efforts, the five-star hotel is embarking on an extensive refurbishment programme at a cost of US$ 30 million to be commenced by the end of this year. HDL has requested for a syndicated loan of US$ 25 million for this purpose on the basis that the rest of the expenses be borne by the Company. This is the first time the hotel is going for a massive refurbishment since commencing operations in 1987. Ahead of the Commonwealth Summit, a soft refurbishment will be done in the hotel starting next month, he said.

“The current room capacity of 380 rooms will be upgraded to 360 rooms and 41 suites at the end of the full refurbishment project. Nadesan also thanked the Government for appointing the hotel as one of the official hotels to host the Commonwealth delegates and we are proud of this,even prior to our finalizing the refurbishment.”