African Sun Limited (ASL) has proposed putting Crowne Plaza as security in its bid to secure a US$10 million loan from a South African-owned development finance institution as the pan-African hospitality group seeks to spread its tentacles across the continent.

The Industrial Development Corporation, one of the leading development finance institutions in South Africa, has agreed to give ASL the loan on condition that it provides an immovable asset-like a building-as guarantee.

The 245-roomed Crowne Plaza is under the ambit of Dawn Properties which has asked shareholders' approval at an annual general meeting later this month for the hotel to be pledged as collateral.

According to a notice, as one of the special businesses of the AGM on September 30, Dawn wants shareholders "to approve/ratify the hypothecation of Crowne Plaza as security for the IDC loan granted to African Sun Limited". ASL has 16, 57% shareholding in Dawn and operates from some of the investment property holding company's properties.

Some of Dawn's properties leased by ASL include Carribea Bay, Elephant Hills, Great Zimbabwe Hotel and Hwange Safari Lodge. The US$10 million has been on the cards since March and ASL chairman Tim Chiganze told shareholders at an AGM in March that the loan would be used to structure borrowings, finance operations and regional expansion.

The interest to be paid would be Libor plus 2, 5% making it the cheapest loan any institution would crave for. Libor - the London Interbank Offered Rate - is a daily reference rate based on the interest rates at which banks borrow unsecured funds from other banks in the London wholesale money market. The tourism product is tired and needs some refurbishments.

Long term funding has been missing on the local market and tourism players begged stakeholders at a summit in February to fund their programmes. In the absence of local funding regional development finance institutions have become potential saviours for tourism operators. Financiers from the region are ready to fund as long operators present bankable projects.

The African Export-Import Bank announced early this year that it is working to funding for requests amounting to raise over US$30 million to be used for the revival of the tourism product. Rainbow Tourism Group has already benefited from the funding facility after getting a US$7, 5 million loan to refurbish its flagship hotel, Rainbow Towers. The seven-year loan attracts an interest of 8, 5% per annum.