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For a while, it seemed that things were heading in a
positive direction for Yemiru Nega, developer of
Dembel City Centre, the largest construction complex
in the country.
But the recent collapse of plans for a new loan
repayment schedule has again put the project in
danger of being taken over by creditors.
Managers at the state-owned Development Bank of
Ethiopia (DBE) put on hold plans to seize the
property back in December 2007, as Yemiru began to
service the accumulated interest on a 186 million Br
1996 loan.
Lately though, both parties have been back at the
negotiating table after the developer proposed a
payment reschedule three months ago.
Two weeks ago, a deal was close to being struck to
extend the loan to 2023, but it was scuppered by the
intervention of the federal agency for the
supervision of state-owned financial institutions.
That was a major blow for Yemiru, who had succeeded
in paying back 44 million Br in the past six months,
completely wiping out the interest on the principal,
thus saving the property from foreclosure.
A
major disagreement is also now brewing between
managers at the DBE, whose president and vice
president survived a recent reshuffling, and their
bosses at the agency over issues involving the
repayment plan for the principal, reliable sources
have disclosed.
Yemiru has paid close to 300,000 Br of the principal
loan between 1999, the year repayment was started,
and early 2008. In the meantime, the loan has been
rescheduled four times by a former management team
of DBE under the presidency of Moges Chemere.
Wondwossen Teshome, DBE's current president, has
asked for guidance from the supervisory agency about
what to do with a March 2008 request from the
developer for yet another extension.
Sources disclosed that if the loan, due to expire in
2010, is left unaltered, there will be no resolution
regarding the ownership of a property that houses
134 tenants and was valued by the DBE at 182 million
Br a few years ago.
The 12-storey building with a blue-glass façade was
built on the 8,000Sqm plot on Africa Avenue, by
Yencomad Plc, a construction firm controlled by the
developer. It opened in 2001.
In December 2007, Yemiru managed to fend off a
foreclosure attempt by the DBE after paying two
million Birr. He also proposed to submit a loan
recovery plan that it was hoped both parties could
agree on.
But authorities at the agency, run by Eyob Tesfaye
(PhD), are not at all happy with the subsequent
proposition, according to sources.
They believe the management of DBE is wrong to ask
for the "waiving of principal arrears" and to
"rearrange the payment" so that it will begin in
January 2009.
The officials believe this would in effect wipe out
25.4 million Br from the bank's books and that the
bank has no mandate to take the decision.
Extending the repayment by a further 13 years is
also deemed against the DBE policy, which is limited
to offering loans for a maximum of 15 years.
"DBE's management is advised to stick to the bank's
policies," a senior government official familiar
with the case said.
Unfortunately, this appears to be a case where none
of those directly involved are willing to comment.
"This is an operational matter for the concern of
the management," Melaku Fenta, board chairman of the
DBE, told Fortune.
"I'm only a president," Wondwossen said. "Talk to
the person responsible for public relations."
Officials at the agency were also not willing to say
anything in public when approached by Fortune;
Eyob said "no comment," which was the same phrase
used by Yemiru.
Though shy to make public statements, this is a loan
that is top of a list of sticky issues for federal
supervising authorities and DBE managers. The agency
holds suspicions that part of the loan might have
been diverted to other purposes, sources revealed.
Because of this, agency officials now demand that
Yimeru releases details of how the loan has been
spent, in addition to disclosing all his assets
within and outside the property. They also want an
external auditor assigned to analyse these
disclosures, Fortune learnt.
In the meantime, the clock is ticking to the
disadvantage of the developer.
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