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Mbaru asks Treasury to issue hospitality bond to save hotels

Jimnah Mbaru
Investment banker Jimnah Mbaru. FILE PHOTO | NMG 

The Government should issue an asset-backed infrastructure bond targeting to buy assets of distressed hotels and lease them back to the same establishments.

Investment banker Jimnah Mbaru says this will save the industry from crashing and maintain jobs. The arrangement would work such that State would use the money from the “hospitality bond” to buy the assets, but upon completion of the payment of the leases the hotels would revert to owners.

His proposal comes at a time hotels face serious challenges following the closure of borders that has prevented tourists from arriving since late March.

Fairmont Hotels indicated intention to sack staff but reversed after the process used was questioned by the government. Hotels and resorts in the Maasai Mara Game Reserve are currently empty while the revenue for the Kenya Wildlife Service is expected to fall by 80 percent with hardly any tourists arriving.

“The Government should issue an infrastructure bond named 'Hospitality Bond' and the funds from the bond would be used to buy and lease back assets of distressed hotels,” said Mr Mbaru, chairman of Dyer & Blair Investment Bank.


“On completion of payment of leases the assets would revert to the owners of the hotels, thereby saving them and many jobs.”

It would be considered a collateralised or asset-backed security with the government as guarantor.

“It is a self-liquidating borrowing. The government acts only as a kind of a guarantor,” said Mr Mbaru.