SINGAPORE - City Harvest Church (CHC) defended the new $45 million loan it took out, with its stake in Suntec as collateral, saying it would buy the church time as donations fall in the wake of the criminal trial involving six of its leaders.
The CHC board held special meetings for ordinary and ministry members last weekend, after an earlier session with executive members, in a bid to quell talk that the loan was a risky one.
The six-year loan from Freight Links Express Holdings comes with an average of $5.77 million in interest and other charges every year, which means the church will have to pay back nearly $80 million in total.
But the church explained that it needed the money to pay back another $50 million loan which it took out in 2011 to nearly double its 20 per cent stake in the Suntec Singapore International Convention and Exhibition Centre to 39.2 per cent.
That three-year loan from construction company Galaxy Capital, which had been due next year, charged 10 per cent interest each year, and required a portion of the principal to be paid annually.
But the new loan interest rate was lower at 8 per cent, and required the church to pay back the principal only in 2019.
"While the previous lender (Galaxy Capital) was willing to defer payment for one year, it was not willing to extend the loan repayment beyond August 2014. This meant that CHC would have had to put out a capital outlay of $40 million in less than 11 months," said the church in a special edition of its in-house newsletter, City News Weekly.
But this is a problem as donations to the church's Building Fund have fallen since founder Kong Hee and five of his deputies were hauled to court on charges of having misused church funds.
In its latest collection which ended in April this year, the church took in just $15 million. Previous collections brought in between $21 million and $24 million each, members said they were told.
With the criminal trial, which has been adjourned till January, possibly running till the end of next year, it was "unrealistic" to pay Galaxy Capital, the church said. "As long as the trial is ongoing, it takes its toll on not just the spirit of the church and members, but also its mental, physical and fiscal well-being," it added.
Kong Hee offered to step down
The banks that the church approached were unwilling to lend the money because they either did not deal with religious organisations or were put off by the trial. The church's board also considered selling part of its Suntec stake, but offer prices were "way below market value", CHC said.
That is why it turned to Freight Links Express Holdings for the new loan, of which $42 million was used to pay Galaxy Capital.
The church argued that the latest loan, which came to light last month when the lender announced it in a Singapore Stock Exchange statement, will give it time to replenish its coffers before the money is due by 2019.
Church member Alvin Lee, a manager in the security industry who has been with CHC for 13 years, said members are worried donations will continue to dwindle and that the church could end up losing its 39.2 per cent stake in Suntec, for which it paid a total of $97.75 million.
"There is a lot of uncertainty, but we've been assured that we will still be able to repay the interest in the coming years even if we continue to collect $15 million over the next few campaigns," he said. "Hopefully, things will turn out well."
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