Financial woes lead Australian-listed company to voluntary administration—similar to bankruptcy process
KATHMANDU, May 18: Concluding that the company was insolvent or likely to become insolvent, the financially-embattled Silver Heritage Group—the operator of Tiger Palace Resort in Nepal—has decided to appoint a ‘voluntary administrator’ to assess the company’s financial position and rescue it from the financial crisis.
The appointment of the voluntary administrator in Australia, where the Group is listed, sheds a light on the trouble the company is facing to remain solvent or to serve its debt and financial obligations.
According to an announcement made by the Australian-listed company on Monday, its board has appointed Ryan Eagle and Amanda Coneyworth of KPMG as the Voluntary Administrators.
The voluntary administrators have now taken over the Group’s operations and are assessing the company’s financial position, the Group announced in a securities filing to Australian Securities Exchange in line with the listing rules.
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This appointment and subsequent takeover of the operation by the Administrators will enable them to devise a solution to the company’s financial problems and suggest likely outcomes including liquidation, according to financial experts.
With the appointment, these administrators will take over the operation of the Group and bear the same responsibility as the board directors did prior to their appointment.
The Silver Heritage Group’s appointment of the administrators comes after its operations in Nepal closed on March 20 due to the nationwide lockdown imposed by the Nepal government to combat the COVID-19 pandemic. Along with Tiger Palace Resort in Bhairahawa, the Group also owns The Millionaires Club and Casino operated in the Shangri-La Hotel and Resort in Kathmandu.
Even before the appointment of the administrator in Australia over the insolvency issue and to find a strategy for the survival, the Group was haunting a buyer to sell its Tiger Palace Resort. Earlier in May last year, the company had announced that it was looking for an outright buyer or partner for Tiger Palace Resort. While some business groups in Nepal, including Chaudhary Group and IME Group, were reportedly interested to purchase the resort, none of them entered into a deal.
A conditional offer to acquire the Nepal operations at $20 million from Indra Bahadur Thapa, a little-known Non-resident Nepali, did not move ahead after he did not deposit non-refundable $3 million within 90 days of the offer. The process to put the Nepal operations on sale even drew suspicion of the Department of Money Laundering Investigation that wrote the Nepal Rastra Bank (NRB) to look into a complaint about the possibility of money laundering.
The closure of the business due to the COVID-19 pandemic is now adding to the woes of the Group. Various problems, including operational weakness in the resort, lack of funding, accounting irregularities, dispute with its former partner Rajendra Bajgain (this later ended up in a settlement and resolution) and an ongoing legal battle over a case of encroaching 5 plots of public land by the Tiger Palace Resort in Bhairahawa have long been plaguing the Group. Bajgain led the process to bring the Group to Nepal in 2011.
Some analysts say that the company’s move to opt for the route of voluntary administration could be aimed at freezing the creditor claims for a time being due to the revenue of the resort hit by the pandemic.
Insiders allege that First Manhattan Group, based in New York, has been trying to acquire the deal by ‘rerouting money from Nepal to Europe and to the United States’. Khagendra Chetry, Lok Nath Tiwari and Ram Chandra Karki own the company in New York.
Is over a billion rupees of Nepali banks at risk?
The Group’s Nepal subsidiary Tiger One Pvt Ltd has received a lending facility of $13.71 million (approximately Rs 1.65 billion on today’s exchange rate) under a consortium of banks led by Prime Commercial Bank Ltd. While the Nepal Rastra Bank (NRB) has sought details from the lead bank about the loans for the Tiger Palace Resort amid various controversies, banks do not seem to be worried about their loans turning bad.
“We have floated loans to a Nepali company owned by Silver Heritage Group for Tiger Palace Resort which is a valuable asset for us. We did not expect that their parent company would come to repay the loans,” said a CEO of a member of the consortium. “The development at their parent company does not impact the quality of our loans floated to Tiger Palace Resort,” he added.
Republica’s stories on Tiger Palace Resort:
1. DMLI starts probe into Tiger Palace Resort over Silver Heritage Group's process of ‘illegal sale’
2. Preparations to sell Tiger Palace Resort raises tax avoidance concerns
3. Millions of dollar could be siphoned off illegally through proposed sale of Tiger Palace Resort
4. NRB seeks details of loan exposure of Prime Commercial Bank over concerns of credit risk
