South Africa’s hotel group City Lodge has Sh384.8 million locked up at Chase Bank, the international hotels chain has disclosed.
City Lodge, which owns Nairobi’s Fairview Hotel and Town Lodge, says in its latest annual report that the deposit was significant enough for its recoverability to be considered a key audit matter.
“The group, through a wholly owned subsidiary, has deposits with Chase Bank (Kenya) Limited amounting to Sh384.8 million at year-end,” City Lodge says in the report.
“The group’s ability to access the deposits is restricted and due to uncertainty about whether the deposits are fully recoverable given the receivership process, an impairment of R24 million (Sh182 million) has been recognised at year-end.”
The multinational, which is also building another hotel at the Two Rivers Mall shopping complex, says the amount written off is an estimate of recoverability of the deposit based on available information about the progress of the receivership as of June.
City Lodge’s external auditor, KPMG, says the locked-up cash was considered a key audit matter because of the level of judgment involved in determining the recoverable amount of the deposit and the subsequent impairment.
The multinational has since classified the cash deposit as “other investments” in its financial statements.
Chase Bank went into receivership on April 7, 2016 and re-opened on April 27, 2016 under the management of the Kenya Deposit Insurance Corporation.
The Central Bank of Kenya (CBK) recently announced that Mauritius’ SBM Holdings has made an offer to acquire the lender, raising hopes that depositors could recoup their cash.
SBM has reportedly proposed to assume liability for 75 per cent of the deposits, with payments expected to start in January. The payouts will, however, be staggered over the medium term.
“CBK … assesses that SBM’s non-binding offer represents a viable proposal for the substantial resolution of Chase Bank, for the benefit of depositors and the strengthening of the Kenyan financial sector,” the regulator says in a statement.
“If agreed, it is expected that the proposed transaction will be concluded by the end of 2017.”
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