The 5 star luxury InterContinental Hotel Nairobi is financially distressed with a Sh700million (USD$7.14million) debt owed to lender. The strategically located five-star hotel overlooking the mausoleum of founding President Jomo Kenyatta and Parliament buildings is in the red with debt as at 31 Dec 2018.
The 389-bed hotel is now at risk of being auctioned by creditors. A letter dated February 7, 2019 from Mr Jonah Orumoi, the chief executive of Tourism Finance Corporation (TFC), to his Privatisation Commission counterpart Joseph Kosgey, lifted the lid on the sorry state of affairs at the top hotel.
Intercontinental Hotels Corporation Ltd and TFC each own 33.83% of Kenya Hotel Properties, the holding company that owns InterCon, as it is popularly known.
Financial challenges
“We wish to bring to your attention the following facts,” Mr Orumoi wrote to Mr Kosgey, whose Privatisation Commission is mandated to sell government assets. “The company (KHP) is facing financial challenges to the extent that it cannot meet its obligations as they fall due.”
Mr Orumoi said KHP is technically insolvent since it cannot service its debts that stood at KES717million (USD$7.3million) at the end of last year. The debt is owed to Stanbic Bank.
“KHP is not able to service its long term facilities as they fall due which have attracted huge accrued interest and penalties,” Mr Orumoi said.
As a result of the financial difficulties, some creditors, such as Stanbic Bank, have threatened to have KHP blacklisted at the Credit Reference Bureau, which will make it difficult to access more credit, if it fails to service the loan within the next 90 days.
Other creditors have threatened to send in auctioneers. In October 2015, TFC lent KHP a loan facility of KES124.7million (USD$1.27million), which remains unpaid. The debt had risen to Sh207.7million (USD$2.11million) as at last December 31.
No insurance cover
Even more worrying is that the hotel has no insurance cover for incidents such as fire breakout, Mr Orumoi said.
The hotel that has not made a profit in 10 years made a KES113.7million (USD$1.16million) loss last year.
“KHP is technically insolvent since its current liabilities (KES717million) exceeds current income (KES206 million) by KES511million,” Mr Orumoi said.
The Nation has learnt that the hotel has had to close the entire second floor since the rooms there are in unserviceable state and in need of major repairs.