SINGAPORE - EMBATTLED City Harvest Church has borrowed $45 million against its stake in Suntec Singapore International Convention and Exhibition Centre to clear a previous loan it could not pay.
If the church - which has six leaders embroiled in an ongoing high-profile court case - defaults on the steep repayments, it could lose its entire 39 per cent slice of the prime property.
The six-year loan has not come cheap, according to details filed with the Singapore Exchange (SGX) by one of the lenders.
The church is paying 8 per cent annual interest on the $45 million, plus $2.6 million a year for five years in what is described as a front-end fee - a fee levied on a borrower in a commercial loan and usually paid at the start of it.
The interest plus fee works out to an average rate of around 13 per cent annually for the six years of the loan - well above home loan rates of less than 2 per cent.
In dollar terms, it has to pay an average of $5.77 million in interest and other charges every year.
At the end of six years, it will still need to pay back the principal of $45 million. City Harvest can repay the loan earlier if it wishes and save on some interest costs.
The loan was disclosed in SGX announcements filed last month by Freight Links Express Holdings, a Singapore-listed logistics firm that is providing part of the funds. Chief executive Eric Khua told The Straits Times on Tuesday: "It's a very respectable return."
Freight Links has a funds management arm investing in instruments like bonds so the loan is nothing new. It was introduced to the deal by local businessman Henry Wee, who provided the rest of the $45 million.
Mr Khua said neither he nor Mr Wee are members of City Harvest, and that this was a "commercially-driven deal".
A City Harvest spokesman told The Straits Times that the money has been used to pay off a $50 million loan taken out from Galaxy Capital to partly fund its acquisition of the Suntec stake.
"Circumstances were such that we were not able to repay the loan in the scheduled period due to the trial," the spokesman added.
Church founder Kong Hee and five of his deputies are facing criminal breach of trust charges for allegedly misusing $50 million of church funds.
The new loan has allowed City Harvest to discharge the Galaxy debt, which was also taken out on stiff terms. The spokesman said executive members of the church "had been assured" that the decision was sound during an extraordinary general meeting on Aug 27.
City Harvest bought a 20 per cent stake in Suntec in 2010 and increased it to 39.2 per cent in 2011. It pledged 19.2 per cent of that stake for the Galaxy loan, which it took out in 2011.
If City Harvest defaults, Suntec Real Estate Investment Trust - which owns the other 60.8 per cent of the convention centre - has first rights to buy the church's stake. If it turns down the opportunity, the stake will go to Freight Links and Mr Wee.
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