“Rehabilitation” of loans by FNPF to Natadola Bay Resort

The Fiji Times has reported the “rehabilitation” of the loans by the FNPF to Natadola Bay Resort Limited. The report is based on the FNPF 2011 Annual report, which has not yet appeared on the FNPF website. It may be that this doesn’t make sense because the censors cut parts of the report. If anyone understands the background to this, your comments would be welcomed.

“THE Natadola Bay Resort Limited will pay $100million of its $302.8m loan over $26.5 years but the remaining balance of $202.8m has an indefinite loan term and is interest free.

The Fiji National Provident Fund, which owns the property revealed this in its 2011 annual report. Along with some of the fund’s other investment projects, the NBRL debt was rehabilitated following a write down of $301m on the property in 2009. The hotel, which was constructed at a cost of $385m was valued at $84m resulting in the write down.

The fund this year wrote back $29m on the property after a revaluation of the property.

The fund’s hope in recovering its funds in the project lies in the second stage of the resort development, which is the sale of the residential lots.

The NBRL debt was restructured into three loans, according to the report.

Loan 1, worth $60 million would be paid over 26 years at an interest rate of 8 per cent.

In the first 12 months, the hotel would only pay interest and from August 1, 2012, it would then start paying the principal plus interest.

Loan 2, worth $40m would be paid over 26.5 years with an interest rate of 8 per cent.

The hotel would pay interest only for the first 18 months and start paying the interest plus the principal from February 1, 2013.

Loan 3, worth $202,830,111 is interest free and has an “indefinite” loan term.

“All surpluses from the Natadola Residential Development shall be applied against the outstanding balance,” the report said.

“All cash surpluses that are not required by NBRL for expenses other than the normal course of the business shall be applied to the outstanding balance.”

The fund however has the right to commence charging interest and capitalising against the balance outstanding at any time in the future.

The fund’s financial year starts on July 1 and ends on June 30.”

FNPF: uncertainty continues

The FNPF is reporting that it recorded a 16 per cent increase in the net operating surplus for 2011, but the Annual Report for year is not on the FNPF website. What we’ve been told is very selective.

The report in the Fiji Times today is totally confusing but the bottom line seems to be that the FNPF investment has no hope of making money without sale of residential lots and that’s not likely to happen so long as we have a Government which has no respect for the rule of law.

FNPF CEO, Aisake Taito, has said that the FNPF now has $110 million invested off-shore. Give the destruction of our economy, this is a good move, but what it means is that the FNPF is admitting that returns in on any investment in Fiji are likely to be very low for some time.

With overseas share markets down, now is a good time to buy and we need to remember that another devaluation is on the cards. When this happens any overseas investments will keep their value.

And devaluation is a certainty – the only question is when. Our exports are not picking up. Sugar is still way down and could even get worse. We hear a lot about a mining boom, but it’s hard to know what the real truth is or when any income might start to flow.

What do latest FNPF announcements mean?

The Government’s backing away from the proposal to force everyone to take pensions (after pensions have been reduced) should come as no surprise.

A lot of Fijians have long had plans to take their lump sum and retire to the village.

Suddenly changing the system so that people could no longer get lump sums would have made a lot of Fijians very angry. On the other hand, the announcement of the cut in pensions made a lot of Indians (and ‘Others’ like Mr Burness) very unhappy.

But the truth is that Bainimarama listens when his troops complain. When anyone else complains, he says he has to make tough decisions in the national interest.

Now what we are going to find out is what happens when everybody starts asking for their lump sum. A lot of people don’t have faith that their money is safe in the FNPF, so they may all ask for a lump sum.

That will be the day when Bainimarama has to make some really tough decisions.