By NEIL HARTNELL
Tribune Business Editor
Fears that the Government's $65m Grand Lucayan purchase is illegal were yesterday slammed as "inane" and "irrelevant", although the deal's closing may be "slightly delayed".
Michael Scott, chairman of Lucayan Renewal Holdings, the special purpose vehicle (SPV) created to own the resort, told Tribune Business that next week's planned closing will likely be pushed back because the Government guarantee needed to underwrite the acquisition's financing must be approved by Parliament.
The House of Assembly returns for the fall on September 19, with the prime minister expected to give a statement providing more details on the Government's strategy for rescuing Freeport's anchor property and achieving the hoped-for rapid sale to a new private sector owner.
Tribune Business previously revealed that the Grand Lucayan purchase was to close on Tuesday, September 11, but Mr Scott said the Government guarantee would be worthless without bringing it into compliance with the Financial Administration and Audit Act via a parliamentary resolution.
"There may be a slight delay in the completion because unlike the last government we have to make sure we dot the 'i's' and cross all the 't's'," Mr Scott told Tribune Business.
"The financial part of this, the demand mortgage, has to be supported by a government guarantee. A government guarantee requires an affirmative resolution of the House of Assembly on the 19th.
"The Government cannot technically enter a guarantee without a resolution of the House. You cannot issue a guarantee unless you get a confirming resolution of the House, otherwise the guarantee is invalid."
The Minnis administration is thought to be financing the Grand Lucayan purchase with a combination of debt and the $25m allocated in the 2018-2019 Budget to support the now-abandoned Wynn Group purchase.
The deal is structured so that the Government pays a $10m deposit, which it has done, and a further $20m upon closing. This is likely to be financed largely through the Budget, with the $35m balance split into semi-annual $5m payments spread over three-and-a-half years.
That portion will come from debt, with the funds likely to be extended by the Grand Lucayan's departing owner, Hutchison Whampoa, as a form of vendor financing. This was proposed a year earlier, when the Minnis administration first suggested it would take an equity stake in a purchase of the resort.
A mortgage, secured on the Grand Lucayan's real estate assets, will provide security for the loan or any form of debt financing. The Government guarantee is needed to provide assurance to the lender that its monies will be repaid.
The resort's purchase, though, has come under fire from Freeport-based QC, Maurice Glinton, who branded the deal illegal because an Act of Parliament was needed for the Government, more specifically its Lucayan Renewal Holdings SPV, to become a licensee of the Grand Bahama Port Authority (GBPA).
All businesses operating in Freeport must obtain a GBPA licence, and Mr Glinton argued that there was nothing in statute law or the Hawksbill Creek Agreement, Freeport's founding treaty, to allow the Government to assume such a status.
Branding the Government's thinking as "flawed", Mr Glinton said: "The recent announcement of the Government, of its intention to purchase the Grand Lucayan resort, is evidence that its decision-making process (or lack thereof) is critically impaired......
"That it should require Parliament to legislate authority in the Government to take on the legal status of licensee of the Port Authority within the domain assigned it by virtue of the [Hawksbill Creek] Agreement is self-evident.
"The Government's cloaking of itself within some special [purpose] vehicle, of what is otherwise an unauthorised joint venture with the Port Authority, does not cure the lack of constitutional capacity to acquire the resort property."
Mr Scott, in reply, described Mr Glinton's 14-page legal missive as "reading like a word processor in motion". He added that the issues raised had already been considered, and were in the process of being addressed.
"As far as I'm concerned it was a display of breathtaking inanity and poor Maurice was reaching for relevance," he told Tribune Business. "All of these technical points have been discussed, will be scheduled and actioned.
"All of this regulatory minutiae has been dealt with. It's irrelevant; his points are completely irrelevant. It's only of a modicum of interest to those who have nothing else to do..
"We need to apply for a Port licence. Why do we need an Act of Parliament to do that? It's an SPV, a private company that is owned by the Government. Governments incorporate SPVs to do things all the time. The SPV is in the process of applying for a Port licence. That has already been considered and is in the process of action."
Mr Scott said the GBPA would likely "bend over backwards" to licence Lucayan Renewal Holdings given that its purchase will save more than 400 jobs at the resort and "indirect employment".
"What is this about? What is the problem with this?" he asked of Mr Glinton.