Word: ciga
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Dates: during 1990-1999
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...direct descendant of the prophet Muhammad. But even though Prince Karim has long been ranked as one of the world's richest men, his financial clout suddenly seems less princely: last week a group of his banks and creditors seized the crown jewel of his business empire, the Ciga hotel chain, which runs some of Europe's most palatial lodgings...
...Khan's business empire began to wobble in the late 1980s when the Ciga hotel group embarked on a spectacularly ill-timed expansion. The goal was to build on its world-famous string of $400-a-night hotels such as the Grand in Rome and the Danieli in Venice. Just as the global economy was about to falter, Prince Karim began piling up debt to pay for costly renovations and the purchase of more than a dozen new hostelries, including the Palace in Madrid. Banks remained eager to put up the money because Ciga could pledge real estate worth more...
Then wave after wave of mishaps struck the now overleveraged firm. The world recession hobbled tourism just as Italy -- the home of most Ciga hotels -- was hit by scandals that toppled several governments. Officials devalued the lira nearly 50%, which almost doubled the cost of repaying Ciga's $670 million debt. Property values plunged, eating away at the collateral of Ciga's creditors, and the war in the gulf deflated what was left of the 1980s travel boom. Many of Ciga's hotels emptied virtually overnight. "They were good guys, really," says the London banker. "But the problem was they...
...pare down the debt, Fimpar, the Aga Khan's holding company, planned to raise $200 million on the Milan stock exchange. But the Gulf War scared off investors, and the plans had to be dropped. Finally, the Aga Khan hired Goldman Sachs last year to sell off some of Ciga's lesser hotels in hopes of raising roughly $175 million to repay loans and stanch losses. One of the few buyers that stepped forward was Situr, an Italian property group, but before a deal could be struck, Situr alleged that Ciga's books contained serious irregularities and dropped...
Shares of Ciga remained frozen on the Milan stock exchange last week as the hotel company reported losses of $173 million for 1992. Yet because he deftly avoided putting any of his private fortune of about $1.4 billion on the line to bail out Ciga, Prince Karim remains one of the world's richest men. He may thus become the first in his line to be in financial trouble despite being worth his weight in diamonds...