INVESTMENT IN MOUNT CHARLOTTE GROUP

Mr Low Thia Khiang asked the Minister for Finance if he will say how much was invested in the Mount Charlotte group and whether the investment has suffered any loss and, if so, what is the extent of the loss so far.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, to date the total investment in the Mount Charlotte Group is S$821 million or £274 million.

No shares in Mount Charlotte have been sold so that there has been no realised loss. Mount Charlotte is a public limited company but its shares are not currently listed in the London Stock Exchange (LSE). The shares were previously listed in the LSE, but trading in the shares was stopped when the Brierley Group acquired 100% of Mount Charlotte's equity in December 1990. Shareholders' intention is for the company to be refloated at an opportune time in the future in a few years' time and to have its shares relisted on the LSE.

Shares in Mount Charlotte were purchased as a long term investment. Therefore, the return from this investment can be determined when Mount Charlotte is relisted on the LSE.

1991 was the most difficult year for UK hotels in 30 years as the tourist industry was badly affected by the Gulf War and the UK recession. Even in 1991, Mount Charlotte operated profitably, increased its average room rate in the key London market and continued to achieve the highest returns on turnover in the industry.

Mr Low Thia Khiang (Hougang): Sir, it was reported that the hotel occupancy rate had been at its worst since 1980. Why then did the Government decide to buy 30% of Mount Charlotte for around £237.5 million in May 1991?

Dr Richard Hu Tsu Tau: There was a proposal by Mount Charlotte to restructure its debt structure to eliminate a large amount of short-term debts at relatively high interest rates through the issuance of convertible bonds and it was the purchase of these bonds which accounts for this 1991 purchase.

Mr Low Thia Khiang: Under what consideration did the Government decide to pump in another £150 million to save the hotel, as it was reported?

Dr Richard Hu Tsu Tau: It is a statement which is totally untrue. It is not to save the company. As I mentioned earlier, it was to restructure the debt, to lower the interest burden.

Mr Low Thia Khiang: Would the Minister estimate how much Singapore could recover from the investment should the hotel be eventually wound up?

Dr Richard Hu Tsu Tau: It would not be wound up. The hotel will be profitable in a few years' time. I cannot predict what is going to happen in a few years' time. But, hopefully, with the recovery of the hotel market in London, which is incidentally the largest single hotel market in the world, and will remain so even when UK is part of the European Community, it will remain for a long, long time as a major tourist hotel market in Europe.

Mr Low Thia Khiang: Can I take it that the Minister is confident that the investment on the hotel would give us a good return by 1995 or 1996?

Dr Richard Hu Tsu Tau: I cannot predict 1995 or 1996, but the investment would not have been made if we did not have any assumption that it would be profitable in the longer term. But I cannot commit myself to specific dates, just as I think the Member would find it difficult to predict what is going to happen in the world in 1995.

Mr Low Thia Khiang: Does the Minister agree that if the money is invested somewhere else, or in other investment instruments, the investment would have a better yield?

Dr Richard Hu Tsu Tau: There is no such assurance. We could have lost it either or made more money. I cannot predict such suppositions.

Mr Low Thia Khiang: Does the Minister agree that the level of risk tolerance for Government investment is much lower than private capital investment, as the Government's money is the people's money?

Dr Richard Hu Tsu Tau: That is true. This is what we do for the bulk of our investments, including Mount Charlotte. It could be argued that in the short-term it does not look as good as it ought to be. But again, all investments are of that nature, unless you are prepared to put it in the bank, and earn a couple of percent interest.

Mr Low Thia Khiang: Has the financial position of Mount Charlotte improved since it was reported the last time?

Dr Richard Hu Tsu Tau: Indeed, it has.