Hotels & Lodges

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Mount Meru Hotel saved by $24m loan from banks

Posted: Monday June 29, 2009 12:41 PM BT

By J. Mwamunyange

Partial Finance: The loan will cover about 60 per cent of the rehabilitation project. The project is expected to be complete by the end of 2010, and will see the hotel's capacity increase to 400 rooms from 170

A syndicated loan of $24 million is expected to revive Mount Mem Hotel, one of Arusha's prime hotels, which has been in a di¬lapidated state and lying idle since 2006.

The loan from two local and one regional bank CRDB Bank Ltd ($11 million), Tanzania Investment Bank, ($3 million) and the PTA Bank ($10 million) - was granted to Hotel Management Ltd for a 15-month rehabilitation and expansion project.

The loan will cover about 60 per cent of the rehabilitation project, while the rest will be financed through equity contributions from local and foreign investors and long term loans from commercial and development banks.

"It is worth noting that of the 41 per cent equity contribution which is $17 million, foreign investors will contribute 90 per cent and the rest will be contributed by local investor, Blue Jewel Company Ltd," said Dr Charles Kimei, CRDB managing director.

According to Mr Pryor, sourcing and mobilising funds for the renovation started in June 2007. The hotel had already closed for business since June 2006.

The projected is expected to be complete by the end of 2010, and will see the hotel's capacity increase to 400 rooms from 170.

At the loan agreement signing ceremony in Dar es Salaam recently, CRDB Bank managing director Dr Charles Kimei said, "We need to invest more so that we can save the economy from the current global crisis. It will be very easy to get out of the crisis if we do the right things by investing more now."

The other signatories to the loan agreement were TIB acting managing director Bahati Sanga and James Kabuga who signed on behalf of PTA Bank.

The chief executive officer of Southern Africa Enterprise Development Fund, Malcolm Pryor, a majority equity holder in the project and Ndewirwa Kitomari, chairman of Hotel Management Ltd, signed on behalf of the project.

Mr Pryor said that the loan will boost tourism in the region and in the long run contribute to social and economic development of the country.

The Mount Meru Hotel, formerly owned by the gov¬ernment, was privatised in 2004 by the Presidential Parastatal Sector Reform and was bought by Blue Jewel Company.

"A key condition to the sale was the undertaking by Blue Jewel to refurbish and upgrade the hotel to internationally acceptable standards," said Dr. Kimei.

Blue Jewel set about sourcing for strategic partners with business management expertise and credibility to attract funding for the rehabilitation project. However, the hotel closed in June 2006.

In June 2007, the lengthy task of sourcing and mobilising funds started again in
earnest.

The revival of the Mount Meru Hotel will boost the government tourism rev¬enues and create over 300 jobs. Over 3,000 families are also expected to benefit directly.

The hotel, which faces the imposing Mount Meru, was built a year after the collapse of the first East African Community in 1977, when Tanzania realised that it didn't have a world class tourist hotel in the area.

A syndicated loan is one offered by a group of lenders who work together to provide funds for a single borrower. The borrower could be a corporation, a large project, or a government.

The main goal of syndicated lending is to spread the risk of a borrower default across multiple lenders.

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