Hotels offer premium for state-backed loans

HOTELIERS are willing to pay a 2% premium on working capital loans, if the Government provides a guarantee on 50% of the cash advanced, Irish Hotels Federation president Paul Gallagher said last night.

Mr Gallagher said as many as 150 hotels were in danger of closing in the wake of the decision by British bank Lloyds to close its Irish subsidiary, Bank of Scotland (Ireland) Ltd (BoSI), by the end of the year.

“The Government must move quickly to introduce additional measures to support otherwise viable businesses, including the provision of a state-backed loan guarantee scheme for working capital. While the IHF recognises moves by the Government to increase bank lending, the priority must now be to provide an increase in the flow of working capital credit to enterprises at affordable terms,” he said.

Mr Gallagher said a scheme with the following components is required:

- It must last for a maximum period of two years.

- €150,000 lending cap per hotel.

- Government guarantee for up to 50% of advance.

- A premium 2% per annum to be paid by the borrower.

Mr Gallagher said that they are not looking for a free ride and are willing to pay the an extra 2% to make it attractive for financial institutions to get involved in the scheme.

“Access to cash is vital. Without it, viable hotels will go to the wall and jobs will be lost,” he said.

Mr Gallagher said that while BoSI is a major lender to the Irish hospitality industry with loans in excess of €2bn to the hotels sector it is the €30 million or so in working capital provided to the sector which is of immediate concern.

“Normally, the summer season would allow hotels to generate enough cash to repay the overdraft of the previous winter and provide a reserve to help get through the following winter. However, given the collapse in visitor numbers, many hotels are operating with seriously depleted cash reserves and will struggle to survive.”

A BoSI spokesperson said that, where practical and customers are not in arrears, term loans will be offered to replace working capital loans. The spokesperson also said that they will roll over existing term loans until 2012 for those customers who have loans falling due, once a number of conditions are met.

BoSI said it would be premature for them to comment on a demand from staff to have a major stake in the company which will manage BoSI’s €33 billion loan book once it ceases to operate in Ireland.

Unite union’s regional organiser Brian Gallagher said his members wanted a 49.9% share in this management-led company.

And the CEO of the Irish Brokers Association, Ciaran Phelan, said as most BOSI mortgage customers were originally introduced to the lender by brokers, they suggest anyone who is concerned about their outstanding mortgage with BOSI should contact their broker for independent advice.

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