The hotel, located 250km from Addis Abeba, was used as collateral when National Trading Corporation secured a loan from the CBE to pay the advance it needed in its acquisition of Tana Market Centre from the Privatisation and Public Enterprises Supervising Agency (PPESA) in 1995.
"We are very happy," said Endakemew Getnet, the CBE's foreclosure and loan team leader. "The court has examined the case well and ruled in our favour."
PPESA had put Tana Market Centre out to tender in August 1995, for which National Trading Corporation successfully bid with an offer of 68 million Br. The corporation was, however, short of cash when it came to paying the required advance of 27 million Br within 10 days for the Tana Market Centre handover.
The CBE asked for collateral worth 30 million Br that was not attached to any other loan. National Trading Corporation offered the Langano Hotel and signed with the bank a loan agreement for 27 million Br in September 1995.
National Trading Corporation borrowed an extra 67.3 million Br from the CBE in October 1995 using Tana Market Centre as collateral. This money was 80pc of the 84 million Br the corporation said it needed for the renovation and other expenses of the building. It also passed on the plans for Tana Market Centre building to the bank as part of the loan agreement.
The confusion that made up a big part of the debate in the courts was that National Trading Corporation claimed that the Langano Hotel was held as collateral only until it was able to take over Tana Market Centre, which it claimed had become sole collateral for its loan agreements with the CBE. The bank defended its claim, arguing that both properties remained as collateral for the loans it extended to National Trading Corporation.
Things, however, were not as rosy as National Trading Corporation hoped. The renovation required more money than it had calculated. Then there was a bomb attack on the building in April 1997. In addition to these misfortunes, fewer and fewer customers visited the site, according to the corporation.
On November 11, 1997, it asked the bank to exchange some of the debt for equity and to also extend more loans for working capital. The bank rejected those requests. The CBE's board decided in April 2001 to foreclose on the collateral. National Trading Corporation went as far as appealing to the Prime Minister's Office to rescue Bekele Molla Hotels from the impending foreclosure onslaught but to no effect.
Asrat Bekele, shareholder and son of the founder of Bekele Molla Hotels, declined to confirm whether the bank had given the corporation a letter confirming that the collateral for the loan had been transferred from the Langano Hotel to Tana Market Centre.
No such document had been released by the bank, the CBE's Endakemew said.
Tana Market Centre was sold to Dashen Bank in October 2001 for 53.4 million Br. But the case of the Langano Bekele Molla Hotel was tied up in a prolonged court dispute.
The ruling in favour of the CBE came the same week the bank sold the Shashemene Bekele Molla Hotel, as part of its bid to retrieve the money it lent to the corporation involving another loan for Helena Health Care Production Plc, another corporation under National Trading Corporation.
The bank foreclosed this property along with a residential house around Meskel Square in Addis Abeba, which rests on 2,944sqm of land. This house will be auctioned on April 20, 2010, at an opening price of 9.7 million Br. The bank's attempt to sell it two weeks ago failed because no offer was made for it.
The hotel sold for 7.7 million Br to investor Bati Wutiye. The hotel will be handed over to him in 15 days after the payment has been made, according to Endakemew.
"The foreclosures will continue until we have collected all the money the corporation owes us," Endakemew said.
National will continue working to get the court ruling reversed and to take the hotel back into the family's ownership, according to Asrat.
The 11 Bekele Molla Hotels, under National Trading Corporation, have been a family business for the past 50 years.
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