Winding up ofhilton’s Sri Lankan company would have saved billions for the government

The Government and Hotel Developers ( Lanka) ( HDL), owners of the Colombo Hilton Hotel, have been relieved of paying a sum of US $ 207 million to Mitsui and Company Ltd. and Taisei Corporation, as a result of the settlement entered on 28.6.1995 on the insistence of public interest activist Nihal Sri Ameresekere.

However the government which had been granting loans to HDL to keep the company afloat has been losing out billions of rupees as a result of the repayment defaults.

A winding up action or liquidation would have saved these colossal amounts from the government coffers, Mr. Ameresekere claims.

In a letter sent to present chairman of HDL Thirukumar Nadesan by Mr. Ameresekere recently through his lawyers, he asserted that the two companies had re- scheduled the balance agreed debt over a further period of 15 years ( originally fully payable by 1999), with a one year grace period, at a reduced rate of interest of 5.25% p. a., ( originally 6% p.a.) which had been immensely beneficial to HDL and the Government, as the Guarantor; and at an average 13% p.a. interest, which rate is comparable to the interest charged by the Government on advances to HDL.

The said write- off would amount to Rs. 81,450 million, as at 30.6.2012, he revealed.

In May 1996, present Secretary, Ministry of Finance and Secretary to the Treasury, Dr. P. B. Jayasundera as then Director General, Economic Affairs and Director of HDL, had been one of the persons anxious to pay Mitsui & Co. Ltd and Taisei Corporation Jap. Yen. 3,110,051,652 in October and November 1996, from the accumulated funds of HDL for him and others to have proceeded to the Sri Lanka Aid Group Meeting in November 1996, at which a sum of about US $ 245 million, had been pledged to Sri Lanka as aid / grant by Japan, Mr. Ameresekere stated in his letter.

Deputy Secretary to the Treasury had by letter dated 10.5.2011 addressed to Chairman HDL, whilst having informed of the inability to accept the re- payment schedule over 18 years proposed by HDL, had requested HDL to re-pay in two years time.

The outstanding loans to the Government are stated therein as Rs. 12,098.6 million. In such a context, under and in terms of the provisions of the Companies Act, Mr. Ameresekere had filed an application in the Commercial High Court to re-structure HDL.

Whilst the two year period commencing on 10.5.2011 had been pending, in breach thereof, shortly thereafter, HDL had been included, as the only Underperforming Enterprise, Scheduled to Act No. 43 of 2011, on alleged grounds of protracted litigation, suppressing the totality of facts pertaining to HDL, Mr. Ameresekere alleged.

Among the HDL cases was one filed by Mr. Ameresekere, owning 70,000 shares, calling for the winding up of the Hotel Developers.

Dr Jayasundera has recommended to the Cabinet not to wind- up HDL, the letter sent by Mr. Ameresekere said.

The Supreme Court earlier observed that the liabilities of HDL was in excess of its assets and ruled that the entity be wound up ending a scandalous saga which has plagued the corporate sector since the early 1990s.