A gift for the Galadaris from
the government of Sri Lanka?

By Ranee Mohamed The Galadari Hotel which was given a loan of Rs.500 million by the government of Sri Lanka is to now have it converted to equity. While certain financial wizards in the country see this as a successful move by the Galadaris to hoodwink the government of Sri Lanka, the Financial Controller,Galadari Hotel,Upali Perera when contacted on Thursday queried whether the Rs.500 million was a 'loan' because it was given from a different fund. He expressed doubts about the money being a loan, for it has to be repayed. Whatever the term given to this Rs.500 million that the government of Sri Lanka gave to refurbish and reconstruct the Galadari Hotel which suffered from two bomb blasts in 1995 and 1997, it is money from the government of Sri Lanka.

Chairman, SR and CCT Fund, when contacted said that the Rs.500 million was given from this fund which dealt with incidents of strikes,  riots, civil commotion and terrorism. This soft loan which was given on the recommendation of the President of Sri Lanka helped the privately owned  Galadari Hotel to get back on its feet.

The owners of the hotel, Galadari Hotels Lanka Limited which is a public quoted company, it is learnt from reliable sources, refused to come up with any finances for the purpose. The  Galadari Brothers in Dubai are believed to own 58% of the company. The government of Sri Lanka had approximately 26% of the shares of this company by the fact that an earlier loan granted too was converted to equity around 1993.

Of the soft loan granted, the company it is learnt, had availed itself of Rs.400 million for the 're-do' of the hotel and although another Rs.100 million was not taken (due to the demand for rooms being low between 1997 -2001) the Rs.400 million loan matured around April 2003 and the company has been avoiding repayment and is today found to be in arrears.

The loan it is learnt had a grace period  of five years and was granted at 2% interest.

When occupancy in the city hotels improved with the advent of the UNF government in 2001, the company it is observed decided to request the balance Rs.100 million too, to refurbish  four floors which were left undone. The present government though reluctantly, had approved this Rs.100 million by the end of the year only because the city needed more rooms.

According to studies, all this happened  while  the local owning company and the company in Dubai did not spend any money on the refurbishment of the hotel or did any aggressive marketing on the property or the destination. In contrast however, the other competing hotels, it is observed, undertook positive and elaborate refurbishment and upgrading programmes to meet the impending increases in the demand for rooms and also the yield from rooms.

Having obtained the total Rs.500 million from the government of Sri Lanka, the company now has come up with a 'grand plan' requesting the government of Sri Lanka to convert the Rs.500 million to equity. The Galadari Hotel is making mega losses and if approved, the Rs.500 million would be a virtual gift to the Galadaris, because they in effect would not need to pay back the loan.

It is also learnt that the company in Dubai has as a 'gesture of goodwill' agreed to convert a loan they are supposed to have granted the local company, into equity. On a closer look, the purpose of this is obviously to continue to maintain the higher share holding.

At the recent annual general meeting held on December 3, 2003, the local shareholders it is learnt were not informed of any of these moves, not even by the  two representatives of the Treasury on the board.

The only 'unbecoming' move that came into sharp focus was the letter of resignation written under duress by the General Manager of two decades, Chandra Mohotti, on the insistence of the  Galadari's  'financial wizard'  from India, Attavar Dinakar.

When asked about the move to turn the loan into equity, Financial Controller, Upali Perera said "This is being done on an agreement, between the government of Sri Lanka and the Galadari brothers."

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