The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Hard Rock Cafe franchise’s liquidator yesterday suggested its remaining assets were dwarfed by liabilities owed to creditors, and warned the Bahamas was “shooting itself in the foot” by not providing greater protection to workers.

Paul ‘Andy’ Gomez, the Grant Thornton (Bahamas) accountant and partner, would not rule out the possibility of the Hard Rock liquidation ultimately becoming court supervised, although he could not make that determination yet.

Still waiting for the Bahamian franchise’s shareholders to provide him with the necessary financial records and business information, Mr Gomez said he had been “reliably informed” there was little to no cash in the company’s bank accounts.

And, disclosing that there were “pressing bills” to pay, the accountant said that while creditor demands were currently only “trickling in” to his office, they were seeking significant sums of money.

While the Hard Rock franchise’s shareholders have done nothing wrong, the level of creditor demands, coupled with the threat of litigation by the Hard Rock International franchisor, may make it a candidate to become a court-supervised winding-up, especially if the business is heavily insolvent.

“If it does, so be it,” Mr Gomez replied, when asked by Tribune Business if the Hard Rock liquidation was likely to be placed under the Supreme Court’s supervision.

“At the end of the day, we’re going to determine which direction it takes as a firm. There are some pressing bills, so whatever happens, so be it.”

He added: “We are awaiting financial records from the shareholders, and I have not gotten any. We have gotten some information on where the bank accounts are located, but I have been reliably informed there’s no significant cash.

“The landlord [Marvin Pinder], he’s owed hundreds of thousands of dollars based on his claim, which we have to test.”

Mr Gomez confirmed that Hard Rock’s former 38 employees would have to stand in line in the creditors’ queue to receive their severance pay and other due benefits, pointing out that ‘secured creditors’ would have first priority.

He added that some of the franchise’s shareholders had been unable to invest further equity into the business to keep it afloat, and said: “They got to the point where they had to stop the bleeding and do what they did.”

Summing up the current position, Mr Gomez strongly hinted at his suspicion that the Hard Rock Cafe franchise was insolvent, with liabilities and debts exceeding assets.

“I need to get the records to see what all the liabilities are, and I’m getting documents every day from creditors,” he told Tribune Business.

“They’re a trickle right now, but the trickle is for significant amounts, and when we compare them to the assets there, it’s going to be interesting.”

Given that the Hard Rock franchise did not own its real estate, the likely best recovery source - apart from any bank account cash - may be the furnishings, fixtures and equipment at the restaurant/bar. However, these could be leased from the likes of Hard Rock International, and are therefore not the franchise’s property.

Mr Gomez, meanwhile, said the situation faced by the Hard Rock employees again highlighted the need for greater worker protection against the possibility of international investors - with no fixed ties to the Bahamas - exiting the jurisdiction without paying their staff what is due.

“We are shooting ourselves in the foot,” Mr Gomez told Tribune Business. “It raises issues, and this story about workers being terminated without benefits is going to happen again and again unless the policymakers put in rules and regulations to govern the conduct of all investors.”

The fate of the Hard Rock employees mirrors that of the former Royal Oasis staff, when Driftwood packed up shop in fall 2004 leaving multi-million dollar liabilities behind it and no severance pay for staff.

Mr Gomez yesterday pointed out that it was harder, in terms of time and costs, to pursue foreign investors in their home countries.

He suggested that the Bahamas create an ‘investor register’ of locals with various skills and investment capabilities, so that foreign investors could find appropriate joint venture partners - and thus have Bahamians who could assist with such winding-ups and be served legal papers.