ISLAMABAD: The aviation division has reportedly been tasked by the Federal Cabinet with formulating a viable future plan for the Roosevelt Hotel in New York City to cap recurring liabilities, knowledgeable sources told Business Recorder. On June 16, 2021, Aviation Division, the administrative head of Pakistan International Airlines Company Limited (PIACL), submitted the following recommendations for consideration: (i) financial support of US $ 17.3 million to PIA-IL for the payment of recurring charges as well as one-off liabilities relating to Roosevelt Hotel, New York, verified by the auditor and recommended by the board of directors of PIA-IL; (ii) instruct the Finance Division to decide on the appropriate funding method of US $ 13 million already approved by the ECC for the Roosevelt Hotel New York; (iii) inform the Federal Cabinet that the future of the Roosevelt Hotel requires a quick decision in order to avoid continued loss to the public treasury; and (iv) approval of the terms of reference (ToR) of the committee prepared by the Aviation Division.
During a discussion, investment board chairman Atif Bukhari (who has since resigned) stressed that there must be a funding cap on security and insurance costs spent on the Roosevelt Hotel. , otherwise the recurring liabilities will continue to accumulate. The Aviation Division clarified that the ECC, at its meeting held on September 2, 2020, endorsed the recommendations of the committee headed by the Vice-Chairman of the Planning Commission and comprising the Secretaries, Finance Divisions, aviation and law and justice constituted to deliberate on the financial and legal implications on the problem.
As a result, the Committee’s recommendation for the requirement of US $ 142 million and US $ 13 million per year as cost of ownership was approved until the GoP finalizes the lease / joint venture of the site. Roosevelt Hotel which did not include the US $ 59 million mark-up.
It was also noted that the Finance Division arranged US $ 142 million as a loan from the National Bank of Pakistan with a mark-up of US $ 5.9 million per year. However, the funding method of US $ 142 million has not been finalized.
The finance minister endorsed the BoI chairman’s point of view and observed that the aviation division should make recommendations for a permanent solution of the Roosevelt hotel to avoid recurring responsibility of the Pakistani government.
Earlier this year, the CEO of PIA-IL, in his presentation to a committee headed by the Vice-Chairman of the Planning Commission, said the additional funds required will be $ 36.173 million as of December 31, 2021 – annual cost of ownership plus hotel liabilities of $ 27,613. million, the additional pension fund withdrawal liability projected at $ 6.560 million, and the legal costs estimated for the litigation at $ 2 million.
The MD, PIA-IL further added that the requirement of $ 36.173 million was developed based on the provision of these funds by the GoP in the form of an aid grant. In the event that the additional requirement of $ 36.173 million is arranged through a loan, the requirement will increase further from $ 36.173 million to $ 39.565 million after including the cost of debt of $ 3.392 million of 36,173 million dollars a year.
The Managing Director of PIA-IL further stated that US $ 18 million already approved by the ECC is available from the National Bank of Pakistan, which is yet to be paid as employee pensions in March 2021. He has proposed that the urgent nature of liabilities (pensions) in the amount of $ 7.754 million may be authorized to withdraw from the available amount of $ 18 million, adding that $ 7.754 million would be replenished on the Pension Fund account upon disbursement of additional funds by the GoP which are necessary for the payment of the first installment of the Withdrawal Obligation from the Pension Fund.
The total payments already made by Roosevelt amounted to $ 7 million, of which $ 4,854,919 was due for property taxes, $ 1,684,114 in property insurance, $ 180,000 in wages and salaries and 280,967 $ other expenses.
The ECC, at its meeting on June 16, 2021, discussed the whole issue of the Roosevelt Hotel and decided that the Aviation Division should consult with the Finance Division separately regarding how to fund and make recommendations for the JCE.
It was also decided that the Aviation Division will formulate a viable future plan for the Roosevelt Hotel after consultation with relevant stakeholders and present it to the CCoP. After review of the plan by the CCoP, it should be submitted to the CEC within 30 days.
Copyright Business Recorder, 2021