An unconscionable offer

Deputy Prime Minister and Minister of Tourism, Investments and Aviation Chester Cooper gave a communication to the House of Assembly this week on the government’s acquisition and sale of the Grand Lucayan resort.

Since the government’s ill-advised purchase of the property in August 2018, about $150 million in taxpayer funds have been sunk into the effort.

Sixty-five million dollars of that money went right into the pockets of Hutchison on Grand Bahama, which got $30 million upfront and $35 million between August 2018 and March of last year through a mortgage facility the government took out with the seller.

The last administration went head first into this arrangement, despite the resort suffering significant damage after being battered by Hurricane Matthew.

Cooper said Hutchison collected $80 million in insurance claims but did not reinvest that into repairing the facility.

He explained that another $30 million in repairs were still needed at the property at the time the government purchased it.

In essence, Hutchison got paid twice for the property and had the great fortune to have the government assume its capital, utility and labor obligations.

As with most major decisions made by the Minnis administration, the alternative scenario depicted was one of ultimate doom, where Freeport’s economy collapsed, and not acting would be to condemn Grand Bahamians to an uncertain fate.

The resort was bought by Lucayan Renewal Holdings Limited (LRHL), a special purpose vehicle, and a sale process began in November 2018.

By April 2019, a deal was in place with Bahamas Port Investment Limited (BPI), a joint venture between Royal Caribbean International and the ITM Group.

BPI was negotiating to purchase the hotel from the government while also negotiating to take control of Freeport Harbour from Hutchison.

In that deal, the board of LRHL negotiated a sale price of $65 million for the resort.

After Hurricane Dorian hit Grand Bahama in September 2019, the property suffered further damage.

The board was able to recoup a settlement of $13 million from the insurance claims.

The board of LRHL further discounted the sale price by $15 million to $50 million.

By March of 2020, the revised deal was ready to be executed.

Then, the pandemic struck, grinding world tourism to a near halt and sending cruise ship companies into credit negative territory as the leisure travel market dried up.

However, BPI did not pull out of the deal.

We are unsure who encouraged whom to continue negotiating, but as our government reeled with the evaporation of tax revenues and we took on record debt to ward off possible societal collapse, BPI made a revised offer to buy the hotel that should never have been entertained by anyone in government.

In November 2020, BPI’s “best and final offer”, according to Cooper in the House of Assembly on Monday, was to purchase the property for $50 million but with the aid of a $33 million loan from the government.

BPI also wanted an upfront cash concession of $12 million applied to the purchase price of the property – in essence, they wanted taxpayers to provide $45 million to allow a private joint venture to buy a government asset.

BPI also wanted terms on the mortgage that were lower than the interest we now pay on almost all our debt.

And there were other outlandish concession asks as well.

To be clear, the government of The Bahamas is not a piggy bank for cash-strapped companies to finesse out of precious borrowed funds that we can now scarcely afford.

We have borrowed money to fund our deficit spending for decades.

Why on Earth would we pay exorbitant prices on debt to lend capital to foreign companies for less money than we paid?

The board of LRHL refused to entertain BPI’s latest offer and it is our understanding that negotiations continued at the Cabinet level.

For any administration to seriously entertain such an unconscionable offer is a betrayal of the trust of the Bahamian people.

Cooper’s revelations serve to highlight the need for transparency in government as we often only hear the details of deals struck by those in power after the fact.

Having a better understanding of what was proposed, we are relieved that the offer was rejected by the current administration.

We only ask that Cooper display the same level of transparency in the current administration’s dealings by tabling the memorandum of understanding the government has entered into with Electra America Hospitality Group to purchase the resort.

Transparency is critical no matter who is in power.

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