BOC’s divestiture in Grand Oriental Hotel uncertain
View(s):The Bank of Ceylon (BOC) is gearing to divest the Grand Oriental Hotel (GOH) in a move to augment its capital base and shed non-core activities but government’s indecisiveness is hampering this process, informed sources said.
BOC has decided that it will not invest in any non-core banking activity, and will in particular not expand its exposure to real estate, whether through GOH, or through its subsidiary, Property Development PLC. “This is all the more important since it is striving to ensure that it complies with capital adequacy requirements which will be mandatory with the implementation of BASEL III,” a source told the Business Times.
This decision to sell GOH has come on the back of BOC selling its stake in Mireka Capital Land Ltd which owns Havelock City in a mandate that saw the state owned entity selling its non-strategic holdings (40 per cent stake) for over Rs. 3.5 billion.
He added that in early 2015 BOC had taken a firm decision that it will not invest further in GOH, and expose itself to either the glut of hotel rooms or residential or commercial space. But it was decided to either part with or refurbish the hotel through a public private partnership, where the refurbishment or redevelopment is funded through external infusion of cash. The plans which were on the drawing board to proceed with this prior to the General Elections in 2015 were put on hold by the new Ministry of Public Enterprise Development, and was again put on hold, in 2016, after BOC’s sale of Seylan shares was reversed by the Government on the basis that it is a ‘public asset’. “The fate of GOH is therefore uncertain,” the source added.