By NEIL HARTNELL
Tribune Business Editor
The Grand Lucayan's chairman yesterday accused Hutchison Whampoa of displaying "a lot of bad faith" over the $65m deal's closing, branding negotiations as "nasty and torturous".
Michael Scott, chairman of Lucayan Renewal Holdings, the Government-owned special purpose vehicle (SPV) that controls the resort, told Tribune Business he was now awaiting Cabinet approval after finally settling the closing terms and costs with the Hong Kong-based conglomerate.
"We have finally agreed the accounts with them after a long, arduous, nasty and torturous process," he said. "I'm waiting for the Deputy Prime Minister to get formal Cabinet approval for it, and then the deal is done. It's been nasty, and there's been a lot of bad faith on the part of Hutchison Whampoa."
Tribune Business understands that approval of the Grand Lucayan purchase completion will likely be sought, and discussed at next Tuesday's full Cabinet meeting. The $300,000 monthly lease payments that the Government was making to Hutchison under the terms of a guarantee figured prominently among the many contentious issues the two sides fought over in the closing talks.
This newspaper was informed that Lucayan Renewal Holdings sought to resist the Hong Kong conglomerate's demands that the Government pay the final monthly installments it claimed were due under this agreement, despite the underlying lease having been terminated when Memories abandoned the resort in January 2017.
The dispute relates to the deal to entice Canadian tour operator, Sunwing, to open the former Reef hotel with its Memories brand. As part of the agreement, the former Christie administration agreed to guarantee its monthly lease/rental payments to Hutchison Whampoa.
Memories' deal foundered after the Hong Kong conglomerate, as landlord, failed to repair Hurricane Matthew-related damage to the property in the aftermath of the October 2016 storm, resulting in the Canadian resort's departure with 400-500 direct job losses.
Despite Lucayan Renewal Holdings' belief that the Memories pull-out effectively terminated the lease, the Christie administration decided to honour the guarantee by paying Hutchison Whampoa the $300,000 per month rental fee from January 2017 onwards - a practice continued by the current government.
As a result, Hutchison Whampoa has likely earned around $6m from the lease guarantee over the past 20 months, saddling Bahamian taxpayers and the Public Treasury with another burden they could ill-afford.
The Memories lease also highlights the ever-growing costs that taxpayers and the Government are incurring in relation to the Grand Lucayan acquisition, with Hutchison Whampoa seemingly trying to squeeze every last cent out of the property before it exits.
Besides the $65m purchase price, the Government has also committed to a $2m subsidy to cover Hutchison Whampoa's operating losses between August 1 and September 11, and waived the payment of $3.25m in Stamp Duty on the conveyancing by the Hong Kong conglomerate. The latter also walked away with $80-$85m in Hurricane Matthew insurance proceeds, rather than put them into repairs.
Mr Scott declined to comment further yesterday on the "closing of accounts" negotiations, which typically involve a purchaser and seller settling how much the former should pay for inventory, such as food and beverage supplies, that they inherit upon the completion of a hotel purchase.
Tribune Business sources reported last week that "trying to agree the final numbers, the accounts" on the Grand Lucayan's inventories was another issue yet to be settled. They revealed that Lucayan Renewal Holdings had hired a team of accountants to assess, and value, the inventories inherited after being presented with a series of bills by Hutchison Whampoa.
Once the acquisition's closing is completed, and receives government approval, Lucayan Renewal Holdings will then be able to focus on readying the property for potential sale. It will have to obtain an appraisal of the property's value, and complete documents that will be made available to potential buyers in a sales process, as well as oversee a voluntary separation process for Grand Lucayan staff wishing to leave.
Meanwhile Mick Holding, the Grand Bahama Chamber of Commerce's president, told Tribune Business that the nine-figure subsidies demanded by the last private buyer to negotiate with Hutchison Whampoa, the Wynn Group, more than justified the Government's move to acquire the property itself.
"My position remains the same, as I have often said, in that I don't believe in government ownership of businesses that belong in the private sector, but this one was a needs must," he said.
"I think they've done the right thing. They're taking one of the players [Hutchison] out of the equation, and seeking a buyer. But it's not just a buyer; it's finding the right buyer."
Mr Holding said the Grand Lucayan needed more than just a product upgrade, with the resort needing to rebuild its marketing and airlift presence. He added that he was not surprised by the level of taxpayer subsidies Wynn had sought, and suggested the issue was likely "to be a factor" in any negotiations with a new purchaser.
"With the [Wynn] negotiations going on as long as they were, part of it had to be down to the level of subsidies requested," he told Tribune Business. "I always thought it was somewhere in the background and one of the factors, given how long the negotiations were taking.
"There will be a potential trade-off between the selling price and the subsidy. If the Government is prepared to take a hit on the selling price, they may not have to make so many ongoing concessions."
The Wynn Group requested a $159m subsidy in its first revised offer, and its final bid included a 20 percent electricity rate discount, hundreds of work permits, and Government guarantees to cover any losses and guarantee a 7 percent investment return.
The Government cited this as justification for why it believed it would be more effective, and cheaper, to acquire the Grand Lucayan itself.