Laguna's debenture holders had 'many options' to surrender notes: owner Peter Kwee

Singapore

WITH Laguna National in the red for a sustained number of years, pioneer members who took up debentures to help finance construction of the golf and country club are not likely to get their money back, said the club's owner Peter Kwee.

Speaking to The Business Times just days before he was to give an account of the club's latest financials to its trustees, Mr Kwee said there are currently about 100-odd members who are awaiting redemption of their non-interest bearing unsecured notes of S$120,000, down from the 971 original noteholders who took up the debentures in September 1991.

On June 10, a day before the 30-year notes were to be redeemed, Mr Kwee wrote a letter to the British and Malayan Trustees Limited, stating that the club was unable to fulfil the redemption "due (to its) current financial position". He has until July 2 to submit the club's latest financials.

Speaking to BT at the Dusit Thani Laguna, a recently-completed hotel on club grounds, Mr Kwee laid out financial statements from two decades ago to highlight the club's lacklustre financials before he took over. As at December 2000, seven years after inauguration, it had accumulated losses of S$15.5 million. Net losses for that year stood at S$6.3 million.

Mr Kwee, who in 2001 bought over the 36-hole venue from a joint venture led by NatSteel Resorts International (now NSL Resorts International), said the Laguna National Golf and Country Club's accounts for 2020 now showed S$1.5 million in losses.

What is now in question is the fate of these debentures, a type of unsecured debt instrument often issued to raise capital for an upcoming project. Often also issued by sporting organisations in the United States and United Kingdom, the instruments carry varying terms, from interest payments to ancillary benefits, such as the option to buy tickets at a favourable price.

Conservatively assuming there are 100 members still waiting for the redemption of their 30-year-old notes worth S$120,000 each, that would bring the amount owed to these note holders to at least S$12 million.

These do not bear interest but for illustration's sake, the sum of S$120,000 in 1991 would be worth S$185,000 in 2019.

Debenture-holders BT spoke to said their money was used to finance the building of the club, which was inaugurated in 1993. Note holders took on the debentures, and still paid membership fees of at least S$40,000, as well as monthly subscription dues.

Mr Kwee acknowledged that he entered into the deal knowing full well his obligations to noteholders. Over the years, he drew up several schemes to pare down these obligations.

One such option in 2005 came in the form of S$23,000 worth of spending credit at the club. Another, in 2014, invited noteholders to top up S$30,000 for a 20-year membership extension, with other perks thrown in, such as complimentary guest green fees, and food and beverage credits.

Earlier this year, noteholders were also invited to top up amounts ranging from S$10,700 to S$42,800 in return for various tiers of membership extensions.

"I gave them so many options," Mr Kwee said.

The bulk of this pioneer batch of members had either surrendered their notes in exchange for these alternative "packages", or are deceased, he said.

Another move he took to ringfence the company's liabilities - that is, Laguna National Golf and Country Club's liabilities - was to move its core business and assets to another company, Laguna Hotel Holdings.

Mr Kwee told BT he had to "set up a new company" in order to get financing from banks to build the new hotel and revamp the golf course when he took over the club.

As at June 11, the day the unsecured notes were due for redemption, Laguna National Golf and Country Club had ceased operations, he said.

"I think it is important and fair to mention that the unsecured notes (were obligations under) the old company, which has already ceased operations based on the club's constitution set up 30 years ago by NatSteel. Currently, Laguna is owned by the new entity, Laguna Hotel Holdings," he said.

Mr Kwee said Laguna Hotel Holdings started in 2013, the same year plans for Dusit Thani Laguna started. To be clear, though, checks by BT showed that Laguna Hotel Holdings was an entity that incorporated in 1983. It had previously gone by the names Exklusiv Designs, Exklusiv Leisure, as well as SS Auto.

Mr Kwee is chairman of Group Exklusiv, a non-listed company reportedly owned by individual shareholders specialising in the automotive industry.

Laguna Hotel Holdings also has not filed its 2020 accounts, but Mr Kwee said it has "just broken even".

"After all, members should also be aware that what they have taken up are unsecured notes," he added. "There is a certain level of risk that comes with that."

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