Millions of dollars in notes held by pioneer members of Peter Kwee's Laguna still unpaid

HUNDREDS of Laguna National's pioneer members who collectively took up tens of millions of dollars in debentures to help finance the construction of the golf club are at a loss as to whether they will get their money back.

A day before the 30-year notes were to be redeemed, the club's current owner Peter Kwee wrote a letter to the trustees, stating that the club was unable to fulfil the redemption "due (to its) current financial position".

The club's latest financial statements filed at the end of 2019 stated that a director has undertaken to provide financial support to allow it to continue operating as a going concern "in the foreseeable future".

Some debenture-holders told The Business Times they took up the notes because the original consortium behind the initial project included credible organisations.

The club was initially owned by a joint venture comprising Singapore-headquartered NatSteel Resorts International (now NSL Resorts International), golf club developer Japan Golf Promotions Inc, and Japanese trading giant Marubeni Corporation.

Here are some key issues in the debacle, first reported by The Straits Times.

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How did three-decade-old debentures get sold to golf-club members?

Debentures are a type of unsecured debt instrument often issued to raise capital for an upcoming project or a planned business expansion. In the United States and United Kingdom, they are often used by sporting organisations and carry varying terms, from interest payments to ancillary benefits, like the option to buy tickets at a favourable price.

In the case of Laguna National Golf and Country Club, the first batch of members had in 1991 taken up non-interest bearing unsecured notes of S$120,000, that the company had undertaken to "redeem in full" on June 11, 2021. This was on top of paying at least S$40,000 in membership fees, as well as monthly subscription dues.

A copy of the unsecured note certificate showed that up to 1,800 such debentures could have been issued. Debenture-holders BT spoke to said their money was used to finance the building of the club, which was inaugurated in 1993.

According to the Monetary Authority of Singapore's inflation calculator, S$120,000 in 1991 would have been worth S$185,000 in 2019.

Based on the club's financial statements as at end-2019, there were 612 debenture-holders with fully paid notes, translating to some S$73.4 million. Its 2020 statements are not yet available on the Accounting and Corporate Regulatory Authority's database.

Other golf clubs in Singapore that have issued debentures include the Jurong Country Club and Raffles Marina, also owned and developed by NatSteel Resorts International. Prominent examples of sporting debentures elsewhere include the Wimbledon championships, where debenture holders have been guaranteed Centre Court tickets and exclusive lounge access.

Teed off

In 2001, entrepreneur Peter Kwee bought Laguna National from NatSteel, after which he revamped the golf course and built a 200-room hotel, the Dusit Thani Laguna, on club grounds.

He made "several offers" to debenture holders to reduce liability, said well-known corporate figure Lim How Teck, who is also one of the original noteholders.

Mr Lim told BT: "Many years ago, one such offer came in the form of new memberships, or S$26,000 in food vouchers by the club. In return, we had to surrender the debentures. Most people thought it was a raw deal."

Mr Lim, currently chairman of Redwood International and former deputy chief executive at the Neptune Orient Lines Group, is chairman of a pro-tem committee comprising hundreds of Laguna National's note holders.

He said the most recent offer came in April this year, when noteholders were invited to top up S$32,000 for a 20-year membership extension, till the club's lease expires in December 2040.

Mr Kwee is also at the centre of a lawsuit involving The Pines club along Stevens Road, which he sold in 2013 to property developer Oxley Gem for S$318 million. Members have accused him of downsizing their clubhouse and relocating facilities without informing them; they are reportedly seeking damages of more than S$100,000 each.

Current state

In a letter dated June 10 to the British and Malayan Trustees Limited, Mr Kwee said Laguna National was unable to meet its commitment to redeem the debentures "due (to its) current financial position".

"Once our business ceases with effect from 12 June, 2021, we will take the necessary steps to finalise our accounts and revert to you again then," he wrote.

BT understands that the trustees have given him until July 2 to submit the club's latest accounts.

But Mr Kwee told BT: "To be honest, I don't think there is much, which is why during the past seven to eight years, I had started taking back all the unsecured notes in exchange for other offers, like new memberships."

He said about 80 per cent of the original noteholders have surrendered their notes. The current market price to join Laguna National is about S$190,000, he said.

Mr Lim said the pro-tem committee presented two counter proposals to Mr Kwee last Friday, for which they would recommend to other noteholders if he were agreeable.

The first involved making a discounted redemption of S$90,000 for the debentures; the second involved a S$8,400 top-up for 20-year membership extensions, in return for the surrendering of debentures.

How the "world-class golf resort" came to be

In March 1991, the government awarded to NatSteel Resorts International the tender for developing and managing a 126-hectare plot in the East Coast. At the time, this was the largest site ever to be released by the government for recreational and sporting purposes.

In NatSteel's S$131 million bid - the highest of five bids received - it proposed building a "world-class golf and country club" on the site, a project estimated to cost between S$200 million and S$250 million.

"Special attention and features will be given to making it a premier venue for golfing by local and multinational corporations," said a statement jointly issued by NatSteel and the then-Singapore Tourist Promotion Board in 1991.

The facility was to have two 18-hole golf courses and be managed as a proprietary club. Unlike a members' club, which gives members voting rights and a say in determining club policies, the rules and by-laws of a proprietary club are framed and altered at the sole discretion of the proprietor.