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Lucayan Chairman Targets $6-7m Hutchison 'Recovery'

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Michael Scott

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Lucayan's chairman yesterday revealed he plans to "go after" Hutchison Whampoa to recover the $6-$7m Memories lease guarantee payment, as he hit back at the PLP's leader.

Michael Scott, blasting Philip Davis's criticisms over the upcoming $2-$3m staff severance payouts, told Tribune Business that the Cat Island MP was "lost in space" and suffering from "Trumpian hypocrisy of the worst kind".

He branded the Official Opposition leader's comments as a "reverse engineering of the historical record", suggesting it was hypocritical for him to attack the payouts given that it, too, assumed responsibility for severance payments to staff of the former Grand Lucayan casino operator, Isle of Capri, when in government.

Pointing out that the Christie administration also used taxpayer dollars to pay casino workers their salaries and benefits under the subsequent operator, Treasure Bay, Mr Scott charged that such "financial appeasement" had led directly to the latest problems with Hutchison Whampoa.

With the Hong Kong-based conglomerate "used to getting its own way", and "indifferent" to the Grand Lucayan's plight and that of Freeport's wider economy, the hotel's chairman said the Minnis administration simply could not afford "to play roulette with the welfare of the employees" by leaving the former owner to determine their fate.

"Having completed the sale, I'm looking at going back after them [Hutchison Whampoa] for recovery of that $6m-$7m overpayment on the Memories support or guarantee agreement," Mr Scott disclosed to Tribune Business, hinting at the possibility of legal action.

This newspaper previously revealed that as part of the three-way agreement between the former Christie administration, Hutchison and Sunwing for the latter's Memories brand to operate one of the three Grand Lucayan properties, the then-government agreed to guarantee the latter's $300,000 monthly lease payments.

Mr Scott yesterday argued that the guarantee was "contingent on the survival of the lease", which was terminated by Memories/Sunwing in January 2017 after Hutchison Whampoa failed to repair damage caused to the property by Hurricane Matthew.

"Hutchison was asked to repair it, but they left with the insurance proceeds, and Sunwing said we're terminating the lease on the grounds of force majeure," he said. "A technical, or policy decision, was taken in the Office of the Prime Minister at the time to continue making those payments."

This was continued under the Minnis administration, but Mr Scott is arguing there was no legal justification to do so given the lease termination, and that the Government should now seek to reclaim the taxpayer monies paid to Hutchison Whampoa.

The attorney, who chairs Lucayan Renewal Holdings, the Government-owned special purpose vehicle (SPV) that now owns the Freeport resort, struck back at Mr Davis's concerns by playing up the multi-million dollar taxpayer support given to Hutchison Whampoa by the former PLP government.

"It's reverse engineering of the historical record," Mr Scott told Tribune Business. "I don't know what his criticisms are. He's lost in space as far as I'm concerned. We were laughing about it earlier. This is Trumpian hypocrisy of the worst kind. That's my answer to his criticisms.

"Before Treasure Bay there was Isle of Capri. They [the previous government] let them go and they walked off the casino property. They left about $2m in unpaid severance, which the then-government had to assume responsibility for. That's what happened then.

"For a while, they paid the salaries, wages and emoluments of the Treasure Bay workers to keep them there; to keep them operating. This was some misconceived strategy; it was totally misconceived. It amounted, in my respectful view, and having looked at the record, to financial appeasement of Hutchison Whampoa."

Mr Scott said this emboldened the Hong Kong-based conglomerate to believe that the Government would always jump to grant its financial demands, and that it could act with impunity, which manifested in the problems encountered over the Grand Lucayan's recent $65m purchase.

"Part of the problem with Hutchison was they were always making these inordinate demands without any thought to master plan what happens in the tourism industry in Grand Bahama, and what role Hutchison was going to play in that arena," he explained.

"There's a litany of fall-outs along the way, and I'll tell you why this becomes relevant and why the Government had to assume responsibility for the employees. When we took control on September 11, Hutchison had the keys in one hand and the phone in the other to the security people, telling them to remove the golf carts from the golf course.

"That would have completely paralysed that operation, and they were also going to remove computers, lap tops and other hardware. They were under the misconception that they could do whatever they wanted, because they were continually being appeased."

Mr Scott reiterated that the Prime Minister's personal intervention, and his own efforts, had resolved the situation, but said it showed that Hutchison Whampoa could not be trusted.

"We could not play roulette with the welfare of the employees of a hotel in a situation where the economy of Grand Bahama is already depressed," he told Tribune Business. "We were dealing with an owner used to getting their own way, and was completely indifferent to the welfare of Grand Bahama.

Mr Scott accused the Christie administration of squandering its leverage over Hutchison Whampoa through the 2016 Memorandum of Understanding (MoU) that granted a 20-year renewal of real property tax breaks for all its Grand Bahama-based subsidiaries.

There was nothing that made Hutchison Whampoa's "tax-free status contingent" on commitments to find a buyer for the Grand Lucayan, and he added: "This is the historical backdrop against which we find ourselves.

"It's not like we're on a policy of throwing away taxpayer money. This is a fait accompli we met, and are trying to achieve a couple of key objectives. One of those is for those people not wanting to stay, and want to leave and take voluntary packages, that has to be treated in accordance with the law."

Mr Scott said neither himself nor any Lucayan Renewal Holdings Board member was involved in negotiating the terms of the Grand Lucayan's $65m purchase agreement with Hutchison Whampoa, as this was concluded before they were appointed.

"We were very active after in the transfer, making sure everything was accounted for," he added.

Mr Davis had blasted the Government for using taxpayer dollars to finance the separation packages for around 150 Grand Lucayan staff who wish to leave the resort voluntarily.

This will slash the workforce from more than 450 to around 303, or by roughly one-third, "more closely aligning" staff with the demands of the 196-room Lighthouse Pointe property - the only one of the three Grand Lucayan hotels that is currently open. The separations will start towards the end of this month or the beginning of November.

As predicted by Tribune Business, the severance pay costs have reignited concerns about the Government's (taxpayer's) financial exposure to Freeport's last 'mega resort' property, especially if it is unable to fulfill its "quick exit" strategy by selling it to a new buyer within three to six months.

Besides the $65m purchase price, the Government 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.

The Government also faces a $35-$39m repair bill if it chooses to proceed with renovating all three Grand Lucayan properties. K P Turnquest, deputy prime minister, previously said the full financing costs could run as high as $124m - a sum still below the total subsidies demanded by Wynn Group and Sunwing, the last two private buyers to look at the property.

Comments

ThisIsOurs 1 year, 12 months ago

Stopped reading halfway so maybe it's my fault. The govt was all over the place through the media talking about how they "had" to buy the hotel, and they'd "have" to take a hit, and it was a horrible "deal" but they "had" to do it anyway. If you were Hutchinson what would you do? Cave or push harder?

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birdiestrachan 1 year, 12 months ago

Scott should be ashamed of himself for constantly talking foolishness. The comparisons he is making ,makes no sense. But of course he and his doc do not know this.

Truthfully I did not expect this Government to be so dumb. Perhaps lots of people are missing from the lunatics home.

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The_Oracle 1 year, 12 months ago

All this goes to show that our successive administrations have been completely inept negotiators, and continue to be so. Oblivious to what the other side of a negotiation see, want, and know, right behind the idiots shoulder. In this it seems PLP and FNM are synonymous.

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BahamaPundit 1 year, 12 months ago

This makes no sense. Any amounts outstanding should have been deducted from the purchase price prior to closing. Seems like outright negligence. Just like the employee compensation should also have been paid by the Vendor prior to the sale closing. After closing, you have a better chance of finding a solid gold nugget on the beach then getting this money back.

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Well_mudda_take_sic 1 year, 12 months ago

Right you are BahamaPundit. Scott is engaged in puffery....his involvement in this deal will do nothing but line his pockets at the expense of Bahamian taxpayers. Stands to reason the late Colin Callender QC had more than a few choice words to describe this very undisciplined fella notwithstanding all of the misery that has thus far come his way in life.

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The_Oracle 1 year, 12 months ago

BP is right, in normal circumstances, however Hutchinson has our Idiots over a barrel. Attempting to deduct the $6-7mil would cause no sale. Hutch would walk away and sit some more. Hutch is bigger than the Bahamas. Their Net profit is bigger than our National debt. They answer to no one except their party Chairman. To be fair, This administration is but the most recent group in over their heads, and must suffer the endless string of bad decisions made and compounded in respect of Freeport. And now I'm thinking i've slighted Idiots, as even they have a 50/50 chance to get something right by sheer odds of random choice.

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TalRussell 1 year, 12 months ago

Not daring get near close the pros and cons of a "Brave" - tis nice try when the comrade Lucayan Hotel's chairman Michael is attempting pull off some kinds brave tutorial splits exercises in attempt he self apply Trumpism vocals and actions of the Imperial red shirts. Minnis, KP and now Michael, does only lacks adding the colour Arrange to whatever hair colours the three man's joined at Trumpism have been using since 10 May 2017. { Can't just make colour Arrange up }.

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truetruebahamian 1 year, 12 months ago

Get rid of Hutchison Whampoa and nationalise their assets. Let them try their luck elsewhere.

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TheMadHatter 1 year, 12 months ago

Mr. Scott obviously doesn't want The Pointe to open. He doesn't realize that Ingraham sold our souls to the Chinese. Unless we do what truetruebahamian suggests, we will just slowly roast ouselves in their fire.

The fact that he uses a negative connotation toward Donald Trump also makes me doubt his intelligence. Trump is leading the new cold war against China and is therefore a hero to all of us.

Mr. Scott ought to spend a month in a Chinese "re-education" facility to allow his eyes to be opened.

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TalRussell 1 year, 12 months ago

Not unlike Donald J, those comrades in, appointed, connected, lawyering, serving, advising, do the banking or helping fiance prop ups Imperial red shirts regime - best get hold information manual on how not talk any business you don't wants comes backs haunt you - on either land lines nor mobile devices - for they can rest damn assured what be all parties be talkin about Whampoa's Freeport business - the foreigner powers intelligence comrades of the well connected foreigners with strong Bahamaland ties - will be listening-in on and recording ya incoming and outgoing calls every word,

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