- March 12, 2015
The following statement was read by CEO of AHI, Mr. Winston Brassington, regarding the scheduled opening of Marriott Hotel, Guyana:
Ladies and Gentlemen of the Media, welcome to the Marriott Hotel. The hotel component of the project will open in April 2015. The hotel will be the first major international brand to come to Guyana in over 45 years. The project has been undertaken following a full and transparent process. Throughout the entire process of this project, the Government/AHI has employed public advertisements at home and abroad to advance each stage of the project:
- 2009—Advertisement for a Public Private Partnership, “Request for Expressions of Interest (EOI) Joint Venture for Hotel Development.”
- 2010—Advertisement for “Pre-Qualification of Contractors”
- 2012—Advertisement for a Supervision Firm “Requests for Proposals”
- 2012—Advertisement for “Final Call for Expressions of Interest (EOI) to participate in AHI’s (Marriott Hotel Project) private equity.”
- 2012—Advertisement for “Atlantic Hotel Inc (AHI.) Requests for Expressions of Interest (EOI) from Casino/Nightclub/Restaurant Operators” A full feasibility study has been conducted by a highly reputed international firm, called HVS International, for the project. The Feasibility Study dated Oct 2012, shows that the project has an overall internal rate of return (IRR) of 11%., and noted that “the financial projections are extremely conservative” The Feasibility Study, excluding sections that contain commercially sensitive or confidential information, was released to the public at our Press Conference held on Sept 19th, 2013. Guyana is not unique in investing in a hotel. Various other Caricom countries have invested in hotel projects as part of their national development, e.g. Trinidad and Tobago fully owns the Hyatt Regency and a portion of the Hilton.
I now come to where we are with the financial arrangements for this project. The framework for the financing of the hotel has not changed and has always remained a matter of public record.
Financing from Republic Bank of US$27 M and from the equity investor of US$8 M remains committed but financial disbursement has been partially delayed due to legal actions filed by the opposition:
Debt Financing of US$27 M
Despite having received final financial commitment from RBL announced in a joint Press Release of 24th May 2014 by Republic Bank Limited and AHI, followed by full execution of all legal documents for the debt financing in October 2014, APNU opposition Member of Parliament Desmond Trotman, filed another legal action in December 2014, opposing the passage of the mortgages from AHI in favor of RBL.
Given that the publication of the mortgage is one of the final steps and is part of the security package required by RBL for the conclusion of the debt financing, the opposition to the mortgages has effectively served to (partially) delay the disbursement of the US$27 M financing from the syndicated group of lenders led by RBL. We are, however, confident that the legal action will be dismissed
It should be noted that the mortgages are only part of the security structure; other parts of security include a debenture that has been registered. As a result, RBL has disbursed a total of US$15.25 M of the US$27 M committed. The remainder balance awaits resolution of the court matter or alternative resolution.
Injection of US$8 M by private equity investor.
Since initial agreements were executed with the private equity investor in April 2013, it has always been a condition, that the injection of the equity was contingent on the conclusion of the commitments with RBL for the US$27 M in debt financing. In May of 2014, following announcement of the conclusion of the commitments of RBL, the name of the investor group was released in the joint release. The injection of the US$8M by the investor group, therefore, continues to be delayed, if not jeopardized, as a result of the legal actions filed by the opposition.
Interim Funding from NICIL to conclude the hotel
As a result of the continued legal and other attacks to delay the injection of the private financing, NICIL has had to fund, on an interim basis, a portion of the expected private financing. The alternative to the temporary investment of additional funding from NICIL would have been the halting of the construction of the hotel with the consequential and probable loss of Marriott’s engagement with the project, the risk of the contractor taking legal action and substantial escalation of costs to complete the project.
As it stands currently, NICIL has advanced app US$16 M in additional funds from its own resources to ensure the conclusion of the hotel. These funds will be reimbursed once the legal challenge to the mortgages is discharged. The additional funds advanced by NICIL as interim funding are NICIL owned funds, which are not derived from taxes, but are the proceeds from the sale of investments owned by NICIL or dividend returns from NICIL investments.
Challenges to the Project
We are all well aware that from the time, in 2009, that former President Bharrat Jagdeo announced the Government’s plans for an internationally branded hotel to be built in our country, the political opposition launched an orchestrated and calculated campaign to deliberately, first discourage, derail, sabotage and then obstruct private investment in the development of the hotel. The hotel project was subjected to:
Parliamentary attacks to stop the project
- A plethora of opposition criticism
- Legal actions in the Guyana courts
- Competitor attacks
- Pliant, often biased and negative sections of the media
- Investors increased perception of Guyana risks due it the failure of the opposition controlled Parliament to pass the Anti-Money Laundering (AML) Legislation
Let me document this for you.
Parliamentary attacks to stop the project
Despite the substantial information being made available to the Parliament in early 2012 and the comprehensive response given to a question by Mr. Ramjattan (the construction contract, tax agreements, and lease agreements were all shared) and a public debate under a Government series on corruption in Parliament, the opposition have still sought to stop the project. On a motion submitted by Mr. Ramjattan in August 2012, the Parliament, on 17th December 2012, passed a motion seeking to halt financing of the project.
In September 2013, Mr. Ramjattan happily advised the private investor that “the combined opposition had passed a motion in Parliament stopping the project.” We had in October the same year, Mr. Joseph Harmon boasting that his party “may not honour any commitments made by the principals here” and Stabroek News running a headline “APNU warns Marriott financiers”, prompting the Private Sector Commission, in October that year, to express its concern at the repeated threats against investors.
The political leaders of both APNU and AFC have consistently made public statements hostile to private investors in the hotel with the express purpose of undermining investor confidence in the project, if not the country as a whole. In May last year, for instance, Mr. Harmon described the investment as almost like “a choke –and- rob scenario.” In the same month, the Kaieteur News headlined Mr. Ramjattan claiming that “the Marriott hotel is born of fraud”
Since we established Atlantic Hotel Inc. an unremitting message of hostility has flowed from the Opposition and from those congenitally opposed to the project. All this, despite the transparent process and information provided at each phase of the project’s development.
The terms and conditions of the financing for the investment and the incentives offered were always a matter of public record and were represented in Parliament since early 2012 by the Honorable Minister of Finance. They have not changed since. They remain the same today. They have always been transparent.
It is precisely this behaviour on the part of the opposition which has made attracting a major private investor for the hotel so difficult. It has not stopped even now that the hotel is built and is about to open its doors. We still have Mr. Nagamootoo declaring that the hotel ‘has something to hide” and “is not interested in partnering with experienced and transparent investors” and the Opposition threatening to dishonor, should they get into office, internationally binding investor agreements. All of this clearly intended to have the investors walk away.
Legal actions in the Guyana courts
We know that the AFC’s, Mr. Trotman, has filed a court action, even with the Hotel construction ninety-nine percent completed, to block the mortgage which was published as one of the final steps required to conclude the financial arrangements of the Republic Bank financing.
We know that the framework for the financing of the hotel has never changed. We know that
the publication of the mortgage and debentures were always contemplated and made public from the inception of the project, was recognized in the feasibility study and made public on numerous occasions.
The Stabroek News, nevertheless, got this all wrong in their article published on the 6th January 2015 when they reported that the publication of the mortgage was a new “major development” and went on to report that it had not been clear, that the Republic Bank financing “would be underpinned by a mortgage which would effectively give control of the hotel to the Bank were it to encounter financial difficulties in making repayments”. The Republic Bank financing, from the inception was to be the senior debt and the number one secured creditor. This was a condition agreed to by all the investors.
Concurrent with, if not part of, the opposition’s determination to scuttle a vital and transformational development project, is the fear of competition it offered. So, we have the Stabroek News and Kaieteur News reporting extensively on statements from the owner of the Pegasus Hotel, predicting “crippling operating losses” for the hotel, that the Hotel “would not even realize a fifteen percent (15%) occupancy” and that the investment “would rapidly lead to bankruptcy”. Mr. Badal declared that “it is no surprise that no credible investor showed any interest in this project”.
Mr. Badal was right about the challenge of attracting investment in the hotel but hopelessly wrong about the explanation for this which he gave.
Media negativity and criticism by select sections of the media
The truth is, that Opposition Leaders, have used a pliant and often a biased media as a convenient platform to denigrate the viability of the project in an effort to subvert foreign and local private investor interest.
In fact, we had a plethora of opposition statements eagerly headlined in our media, all grossly irresponsible and unfounded, claiming, for instance, that “no feasibility study had been done to support the project”, that “the hotel project is a shady deal for the benefit of the government’s friends”, “Marriott is a brazen corrupt exercise” and even that “Guyana was never on the radar for a Marriott franchise”.
It is exactly this avalanche of negative headlines featuring Opposition statements so eagerly published in our media, which has made identifying a major private investor for the project so difficult.
Investors increased perception of Guyana risks due it the failure of the opposition controlled Parliament to pass the Anti-Money Laundering (AML) Legislation
There is one change in the management of the entertainment complex. The private investor, ACE Square Investments Ltd., has opted not to operate the Casino due to the risk of being both joint investor and operator in a Casino in a country where anti-money laundering legislation continues to be absent.
The Casino will now, therefore, be operated by Marriott, who, in recent years, has successfully operated a number of Casinos in other countries, such as Aruba in the Caribbean. The entertainment complex, which will employ some 200 persons, will open before the end of the year.
It should be noted that despite all of the attacks on the project, the following have been achieved:
- The Marriott brand has been secured;
- The hotel is being built in line with budget and to Marriott standards and will open in April 2015;
- The hotel is underway in employing approximately 230 Guyanese persons picked from a total of over 3000 applications, in an extremely open and transparent process;
- A private equity investor has been found and an agreement executed with this investor; the investor was cleared by both Marriott and Republic Bank and announced publicly in 2014;
- US$27 debt financing committed and all legal documentation executed to allow disbursement; of this US$15.25 M disbursed by certain of the investors in the debt syndicate;
- Following the fallout from the failure to pass the AML Bill, Marriott has agreed to be the operator of the Entertainment Complex;
- Based on the Feasibility Study and the full compliance of Marriott with applicable tax laws, AHI is poised to be the largest taxpayer in the hotel and hospitality sector.
Both the financing from the Republic Bank and the private investor, as we announced, in May last year, continues to be in place and remains committed. It is, however, partially on hold, until the Trotman actions are resolved. We are confident that, while Trotman’s actions have temporarily delayed the conclusion of these financial arrangements, the court will rule against them.
In the meantime, NICIL, as the principal owner of AHI, has from its own resources, earned directly from the sale of investments owned by NICIL or dividend returns from its investments, and not from taxpayers money, provided bridge financing to an amount of US$16M for the completion of the construction of the hotel. NICIL, will of course, be reimbursed in accordance with the financial arrangements originally projected.
Let me remind you of what I have said before. Every dollar invested in the hotel is well invested. NICIL’s and, by extension, AHI’s financial transactions, are subject to full public disclosure and scrutiny, are audited by the Audit Office of Guyana and are presented for Parliamentary review.