The Tribune

By NEIL HARTNELL Tribune Business Editor A LEADING businessman yesterday blasted Prime Minister Hubert Ingraham for what he alleged were contradictory public positions that ultimately undermined Kerzner International's "credibility" with its lenders and "adversely impacted" efforts to restructure the company's $2.5 billion debt burden. Franklyn Wilson, the Arawak Homes and Sunshine Group chairman, said in the aftermath of yesterday's announcement by Brookfield Asset Management that it was "terminating" its proposed $175 million debt-for-equity swap, a move that would have allowed Kerzner International to escape its debt crisis, that the latter's refinancing efforts had been undermined by the Prime Minister's comment and actions over the $2.6 billion Baha Mar project. Mr Wilson said Mr Ingraham had initially gone on record as saying that Paradise Island and Cable Beach, as the latter was envisaged, could not co-exist due to fears that together they would split the market for high-end tourists, each leaving the other poorer off. However, the Government ultimately approved the Baha Mar project, a turn of events that Mr Wilson yesterday said undermined Kerzner International, and its financial projections, in the eyes of its lenders/creditors. It is understood that even the Government believes the impending Baha Mar project is a critical reason why Kerzner International was unable to refinance its $2.5 billion debt, lenders and the financial markets believing the market is not large enough to sustain the two, and thus making it uncertain as to whether they will recover their Paradise Island exposure. "The Prime Minister, at a certain point in time, when it was clear Kerzner was involved in a serious effort to refinance his loan, made a statement that both those projects, Atlantis and Baha Mar, cannot co-exist," Mr Wilson told Tribune Business. "We now know that at the time he made that statement, Kerzner was involved in efforts to refinance. It would be reasonable to assume all financiers in conversation with Kerzner would be aware of the statements by the Prime Minister." As a result, Kerzner International and its lenders were likely to have discussed projections and financial models that did not allow for Baha Mar's existence, only for the latter to succeed in its efforts to replace gaming giant, Harrah's, with Chinese financing, and the project to be ultimately approved by Mr Ingraham and his government. "How did Kerzner have any credibility with its financiers after that," Mr Wilson asked. "With the Prime Minister's first statement, with such certainty, that these two projects could not co-exist, and his subsequent approval of Baha Mar, it would be reasonable to conclude that it would have an adverse impact on the prospects of Kerzner to get financing on more favourable terms that what they got from Brookfield." As a result, Mr Wilson questioned "the extent to which the Prime Minister's words and actions may have contributed significantly" to Kerzner International's debt woes. He added that Harrah's used Mr Ingraham's statement to Parliament as cover to withdraw from the Cable Beach development. In fact, Mr Ingraham had told Parliament that he had already been informed by Harrah's of what it planned to do before he spoke. Still, Mr Wilson said: "People in public policy have to give deep consideration to the weight of their words. "These are two instances where it's not clear that the Prime Minister's words were in the national interest." Mr Wilson said he understood that Brookfield has asked its advisers, especially attorneys, to stop working on the Kerzner International transaction several days ago to prevent escalating costs. On the wider ramifications of the Brookfield transaction's collapse, the Arawak Homes chairman told Tribune Business: "To me, clearly, it introduces a heightened level of uncertainty, and uncertainty's never good for business. "Atlantis is too important a company for the Bahamian economy not to have consequences for local businesses." Meanwhile, Craig Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business that employment levels among Kerzner International's 7,500-8,000 strong Paradise Island staff would be unaffected by the collapse of the Brookfield deal and ongoing jockeying among the company's lenders. "I believe there's a mandate from the remaining creditors to maintain certain revenue levels and standards that are quite lofty, and they will need human resources and human capital to hit them," Mr Gomez told Tribune Business. This would effectively act as a guarantee to maintain Bahamian jobs, and Mr Gomez said the key unanswered questions at this point were whether the creditors returned to the original relationship and terms with Kerzner International in the wake of the Brookfield deal collapse. Another issue was whether the Toronto-based asset manager would look to revive the debt-for-equity swap in a different form, or if it would settle for its junior lender position. "It's a fight among creditors," Mr Gomez said.