After 5 years of operating in Lagos, InterContinental Hotels Group Plc, the world’s third-biggest hotel chain has decided to withdraw from Nigeria following a property receivership disagreement with its local partners.
The receivership disagreements can be traced to May 2017, when the Court ordered Skye Bank Plc -one of the lenders to the $83 million InterContinental hotel- to take over the property from its owner Milan Group over debts of $29.8 million and 3.8 billion naira. However, IHG continued to manage the property, making it go into receivership.
These multi-national company exit from Nigeria is the second of its kind. In June 2017, Abu Dhabi-based telecommunications operator Etisalat, left the country after it failed to pay the remaining $589m from a $1.2bn loan it took from a consortium of 13 banks.
During this period, Etisalat which had a 45% stake in the Nigerian market, was ordered to transfer its shares to a loan trustee after it became obvious that it could not pay up the $589m debt of the original loan.
The crises trailing the telecommunications company led to its exit from Nigeria and in a bid to salvage the situation, the Etisalat Nigeria was acquired, with its name changing to 9mobile. However, there are speculations of instability in 9mobile and a possible acquisition by telecommunications giant GLOBACOM.
Come 18th January 2018, the 2013-branded tallest hotel in Nigeria and West Africa would no longer operate an InterContinental-branded property in the giant of Africa, noted Simon Stamper, IHG’s director of African operations.
Over the years, InterContinental Hotels Group PLC has been battling with a backlog of debt. As at June 2017, the group’s long-term debt & capital lease obligation for the quarter that ended in June 2017 was $2,106 Million. These debts have been issued over a period of 3 years.
In the past 3 years, the company issued $515.56873389 million of debt. As at the end of 2017 first quarter, percentage of the company’s assets that are financed with loans were measured at 0.67%.
Reviewing its annual data, IHG’ long term debt and capital lease obligation raked up debts in millions of dollars dating back to 2015.
Reacting to the current crisis, the receiver for InterContinental Hotel in Lagos, Messrs Kunle Ogunba & Associates said “The hotel’s revenue cannot sustain IHG’s charges of almost N40 million monthly without further borrowings. Further borrowings based on the peculiar circumstances of the hotel is foolhardy as the hotel is currently indebted to two banks in excess aggregate of over $100 million”.
However, the group, in a notice of termination of agreement, expressed its displeasure with Messrs Kunle Ogunba & Associates who was appointed the receiver/manager by Skye Bank, following an interim court order.
Acting on this displeasure, the IHG is using the power vested on it by Clause 16.1 to immediately terminate the agreement upon the appointment of an administrator or receiver over the assets of Milan, whereupon the marks, licence and software licence granted for the use of Milan by IHG shall cease, of which access of the hotel to IHG’s reservations system will be suspended and the management and operation of the hotel by IHG would be terminated.
Leaving Nigeria however does not mean leaving Africa as operations in South Africa, Mauritius and Zambia will still continue.
Dollar shortage and recession may have a hand in raked up debts of these two multinational companies exit (Intercontinental Group and Etisalat) because Etisalat’s troubles began when it battled with a $1.2 billion loan repayment from 2013. During this period exchange rates skyrocketed, plunging companies into deeper debt.
The travails of the hotel group and the telecommunications firm can be seen as a cautionary tale to other businesses operating in the country.