Politics and the Atlantis deal
By PACO NUNEZ
Tribune News Editor
As is to be expected at this advanced stage in the election cycle, every issue with potential political mileage is going to be spun for all it's worth.
Just so with the collapse of the Atlantis ownership transfer deal. Mr Christie says Mr Ingraham should have been more forthcoming about the details, Mr Ingraham says Mr Christie's poor decisions in office created the conditions that led to the deal in the first place, and Branville McCartney says both men knew the proposal was bad for Bahamians, but kept this information from the public.
And, in another clear indicator of the times, even while politicking their hearts out Messrs Christie and McCartney have both sought to give the impression they are the only straight talker; the one not using the failed deal as a political stick to beat the others with.
The PLP leader has provided us with perhaps the most amusing quote, a classic example of political doublespeak.
Berating the Prime Minister for "playing politics" as the deal collapsed, Mr Christie said: "Atlantis is the nation's single largest private employer and thousands of Bahamian jobs are at stake."
Then: "We're told he found out on Friday that the Brookfield deal was going under. Did he tell the people of the Bahamas? Did he call union leaders or meet with workers? Did he start reviewing options for moving forward? No."
Let's see if we can follow his logic. The issue is too sensitive and too important for the Prime Minister to continue with politics-as-usual. To prove this, Mr Christie tries to scare the hell out of everyone ("thousands of Bahamian jobs are at stake"), then uses his alarmist interpretation to criticise the behaviour of his political opponent.
A political jab, disguised as a warning about making political jabs. Did Mr Christie think no one would see through his crafty trick?
His version is alarmist and inflammatory, because anyone with the merest hint of business sense - and I'm sure that includes Mr Christie - knows two facts to be true.
The first is that there is nothing the government can do at this stage about the underlying factors: Kerzner's inability to pay its creditors and the decision of those creditors to call in their loans.
The DNA may well be right, the deal would not have been ideal for the Bahamas; nevertheless, it was the only one on the table. What should the government have done, allow the largest private sector employer in the country to go bankrupt? Stage a $2.3 billion bail-out?
Fact
The second, more important fact, is that contrary to Mr Christie's assertions, the failure of the Brookfield deal has in no way rewritten the future for Atlantis workers.
That's not to say everything will necessarily be fine in the long-run, only that the probability it will has not been improved or worsened by the collapse of the deal.
This is especially the case, as while the transaction was scuppered by two junior creditors, the major players were all onboard, meaning a revised proposal with relatively minor changes could see the deal resurrected soon.
So, at the end of the day, workers will be laid off if the resort performs poorly - just like in 2008 with the onset of the global financial crisis.
If Atlantis does well, people will keep their jobs. Simple as that.
Now, no one is naive enough to believe the going will be easy; the creditors will expect hefty profit margins. After all, they're in it to get their money back.
But an essential ingredient in this formula is the product, which attracts the guests in the first place, and the new owners will know an understaffed resort is the fastest route to falling standards.
So, is it merely a case of much ado about nothing? Not quite.
What all the political gauze of the last week or so has managed to do, is obscure the real lesson of this "crisis" - the extent to which the notion has become imbedded in our collective psyche that as goes Atlantis, so goes the Bahamas.
The anxiety unleashed by this turn of events exposed how inextricably intertwined our sense of national well-being has become with the fate of a single entity.
Even those violently opposed to the pink monstrosity across the bridge have been lulled over the years into the assumption of its permanence, its inevitability.
Leaving aside arguments about whether the nature of our economy would have allowed for any realistic alternative, can it be healthy for a society to pin all its hopes on a single business, the ultimate fate of which is decided beyond our shores?
Of course, this leads us into a consideration of what the Bahamas would be today if Sol Kerzner had never come here in the first place.
When 800 workers were laid off from Atlantis in 2008, there was widespread concern that it would spark a crime wave. What would the other 8,000 employees be doing right now if history had taken a different course?
What other cracks in our society have been papered over by the existence of a mega-resort which just as easily, might never have been?
* What do you think?
Email: pnunez@tribunemedia.net
January 23, 2012
tribune242
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
Showing posts with label Atlantis Bahamas. Show all posts
Showing posts with label Atlantis Bahamas. Show all posts
Monday, January 23, 2012
Saturday, January 21, 2012
Kerzner's Atlantis might have problems... but the sky is not falling
DON'T LISTEN TO THE MESSENGERS OF DOOM
tribune242 editorial
THE SOUND bites being fired off by opposition politicians over the collapse of the Kerzner agreement with its Brookfield creditor gives the impression that they are intent -- in order to deal a mortal political blow to Prime Minister Ingraham-- on striking fear in Kerzner's staff just at a time when the resort is experiencing a favourable turn-around in business.
Although the Kerzner attempt at an ownership transfer failed last week, the current dispute is between creditors, aggrieved that a junior in their midst appears to have outsmarted the remaining six, all senior in the creditor lineup. They feared that Brookfield, in its proposed $175 million debt-for-equity swap, would be the sole beneficiary to any future success of the resort, leaving them empty handed. They appealed to a court in Delaware, which stopped the ownership transfer pending a court hearing. Brookfield, instead of wasting precious time in court, cancelled the Kerzner agreement, in the meantime continuing to try to broker a deal with its fellow lenders.
The Atlantis resort and the One & Only Ocean Club remain in Kerzner hands and under Kerzner management. Kerzner International president, George Markantonis, has repeatedly assured his staff and the public that the Kerzner-Brookfield transaction would in no way affect their jobs. Prime Minister Ingraham has also been given assurances that as far as the present transaction is concerned, Bahamians -- almost 8,000 of them -- have no reason to fear.
What they do not realise is that the debt crisis in Greece -- now tottering on the brink of default -- could create such an economic tsunami that international commerce, including tourism, could grind to a sudden halt. And as everything has a logical conclusion, the results would be -- no tourists, no jobs, no hotels. In these circumstances, employment at Atlantis would suffer a faster after-shock, forcing downsizing more than the present squabbles among Kerzner lenders.
And so, as the Kerzner president has said, not only would the lenders' foreclosing or putting the company into bankruptcy be "very far fetched", but so would the loss of local jobs. At present, said Mr Markantonis, "it's really looking like a nice January... and a strong winter." He hinted that additional staff might even be taken on.
In fact, Atlantis is too big to fail. It would cost more to go into bankruptcy than to keep the hotel open and continue to fight for business with a dedicated -- not a politically spooked staff -- as important members of the team.
Based on a $3 billion valuation of the property stamp tax alone would be $360 million. (See Tribune Business Editor Neil Hartnell's article in today's Business section).
Opposition Leader Perry Christie has berated Prime Minister Ingraham for not telling the Bahamian people on Friday that the Brookfield deal had failed. How could anyone speak on this matter with any authority when no one -- not even the Kerzner team - knew what was going on at that time. Mr Ingraham could have opened his mouth and babbled a lot of nonsensical platitudes that might have sounded good, but would have meant nothing because he -- like everyone else -- knew nothing. A wise man does not open his mouth unless he is sure of what he is going to say. This was a fight among lenders as they saw a lucrative deal about to slip through their fingers.
Mr Christie accused Mr Ingraham of not fighting for Bahamian jobs. How could Mr Ingraham enter the debate until he received an application from Brookfield for the government's approval of the transaction? It was at that point that he could have had his say and presented Bahamian demands, but before Mr Ingraham could properly read the application, Brookfield withdrew it. What did Mr Christie want Mr Ingraham to do -- fly to wherever the creditors were meeting, kick the door in and demand an audience? The idea, although ridiculous, is good political fodder for the ignorant. Mr Christie knows he is just making political noise. If he sincerely wanted to save Bahamian jobs he would stop ringing alarm bells.
And if Atlantis employees really want to save their jobs they will close their ears to "the sky is falling" myths and avoid the disaster into which Chicken Little led his friends by his false alarm.
According to the nursery rhyme, a very foolish Chicken Little was in the woods one day when an acorn fell on his tail. The silly little chick decided that the sky was falling, and so he ran to alert all his farmyard friends. When he told Henny Penny, she wanted to know how he knew that the sky was falling in. "I saw it with my eyes," said Chicken Little. "I heard it with my ears. Some of it fell on my tail." "We will run," said Henny Penny, "and tell the king." They lined up three more friends, frightening them into action with the same end-of-the-world story. Eventually, they came to the den of Foxy Loxy, who listened to the sky is falling in tale, and told them: "We will run," he said. "We will run into my den, and I will tell the king."
They ran into Foxy Loxy's den, But they did not come out again!
And that is just what will happen to Atlantis staff if they pay serious attention to all of these Chicken Littles, Henny Pennys, Turkey Lurkeys, Ducky Luckys and Goosey Looseys running around in today's political arena ringing false alarm bells.
Atlantis might have problems, but so far the sky has not fallen in.
January 20, 2012
tribune242 editorial
tribune242 editorial
THE SOUND bites being fired off by opposition politicians over the collapse of the Kerzner agreement with its Brookfield creditor gives the impression that they are intent -- in order to deal a mortal political blow to Prime Minister Ingraham-- on striking fear in Kerzner's staff just at a time when the resort is experiencing a favourable turn-around in business.
Although the Kerzner attempt at an ownership transfer failed last week, the current dispute is between creditors, aggrieved that a junior in their midst appears to have outsmarted the remaining six, all senior in the creditor lineup. They feared that Brookfield, in its proposed $175 million debt-for-equity swap, would be the sole beneficiary to any future success of the resort, leaving them empty handed. They appealed to a court in Delaware, which stopped the ownership transfer pending a court hearing. Brookfield, instead of wasting precious time in court, cancelled the Kerzner agreement, in the meantime continuing to try to broker a deal with its fellow lenders.
The Atlantis resort and the One & Only Ocean Club remain in Kerzner hands and under Kerzner management. Kerzner International president, George Markantonis, has repeatedly assured his staff and the public that the Kerzner-Brookfield transaction would in no way affect their jobs. Prime Minister Ingraham has also been given assurances that as far as the present transaction is concerned, Bahamians -- almost 8,000 of them -- have no reason to fear.
What they do not realise is that the debt crisis in Greece -- now tottering on the brink of default -- could create such an economic tsunami that international commerce, including tourism, could grind to a sudden halt. And as everything has a logical conclusion, the results would be -- no tourists, no jobs, no hotels. In these circumstances, employment at Atlantis would suffer a faster after-shock, forcing downsizing more than the present squabbles among Kerzner lenders.
And so, as the Kerzner president has said, not only would the lenders' foreclosing or putting the company into bankruptcy be "very far fetched", but so would the loss of local jobs. At present, said Mr Markantonis, "it's really looking like a nice January... and a strong winter." He hinted that additional staff might even be taken on.
In fact, Atlantis is too big to fail. It would cost more to go into bankruptcy than to keep the hotel open and continue to fight for business with a dedicated -- not a politically spooked staff -- as important members of the team.
Based on a $3 billion valuation of the property stamp tax alone would be $360 million. (See Tribune Business Editor Neil Hartnell's article in today's Business section).
Opposition Leader Perry Christie has berated Prime Minister Ingraham for not telling the Bahamian people on Friday that the Brookfield deal had failed. How could anyone speak on this matter with any authority when no one -- not even the Kerzner team - knew what was going on at that time. Mr Ingraham could have opened his mouth and babbled a lot of nonsensical platitudes that might have sounded good, but would have meant nothing because he -- like everyone else -- knew nothing. A wise man does not open his mouth unless he is sure of what he is going to say. This was a fight among lenders as they saw a lucrative deal about to slip through their fingers.
Mr Christie accused Mr Ingraham of not fighting for Bahamian jobs. How could Mr Ingraham enter the debate until he received an application from Brookfield for the government's approval of the transaction? It was at that point that he could have had his say and presented Bahamian demands, but before Mr Ingraham could properly read the application, Brookfield withdrew it. What did Mr Christie want Mr Ingraham to do -- fly to wherever the creditors were meeting, kick the door in and demand an audience? The idea, although ridiculous, is good political fodder for the ignorant. Mr Christie knows he is just making political noise. If he sincerely wanted to save Bahamian jobs he would stop ringing alarm bells.
And if Atlantis employees really want to save their jobs they will close their ears to "the sky is falling" myths and avoid the disaster into which Chicken Little led his friends by his false alarm.
According to the nursery rhyme, a very foolish Chicken Little was in the woods one day when an acorn fell on his tail. The silly little chick decided that the sky was falling, and so he ran to alert all his farmyard friends. When he told Henny Penny, she wanted to know how he knew that the sky was falling in. "I saw it with my eyes," said Chicken Little. "I heard it with my ears. Some of it fell on my tail." "We will run," said Henny Penny, "and tell the king." They lined up three more friends, frightening them into action with the same end-of-the-world story. Eventually, they came to the den of Foxy Loxy, who listened to the sky is falling in tale, and told them: "We will run," he said. "We will run into my den, and I will tell the king."
They ran into Foxy Loxy's den, But they did not come out again!
And that is just what will happen to Atlantis staff if they pay serious attention to all of these Chicken Littles, Henny Pennys, Turkey Lurkeys, Ducky Luckys and Goosey Looseys running around in today's political arena ringing false alarm bells.
Atlantis might have problems, but so far the sky has not fallen in.
January 20, 2012
tribune242 editorial
Thursday, November 25, 2010
The Parliament’s decision to unanimously approve Baha Mar’s request for 8,100 work permits is troubling...
Decision to approve Chinese work permits troubling
BY LYNDEN NAIRN
At the risk of prejudicing my views on this matter, let me remind your readers that “a bird in the hand is better than two in the bush”.
The Parliament’s decision to unanimously approve Baha Mar’s request for 8,100 work permits is troubling because it appears that all of the relevant factors were not considered or even known.
At the outset, I want to make it clear that Baha Mar has the right to invest whatever amount it wishes, wherever it wishes and whenever it wishes within the confines of our laws.
I also believe that consistent with the tenets of our capitalistic economy, Baha Mar has the right to make good and bad business decisions. It is not right, for instance, to deny approval of a Bahamian project on the basis that it would create a glut of room inventories in the marketplace, even though one would expect investors and their financiers to have regard for that possibility.
The labor issue is a significant problem not only because it robs Bahamians of maximizing their benefits from the project, and not only because on its face it puts Atlantis at a disadvantage, but because it represents a business deal that apparently could not be financed if the financier were not afforded certain privileges.
During Atlantis’ multiple phases, the government thought that it was in the best interest of the Bahamian people to require Atlantis’ labor component to be at a certain level. Undoubtedly, that imposition caused Atlantis to engage labor at a higher cost than it would if that condition did not exist.
A few years later, in order to ensure that financing is secured for a project, the government has decided to allow Baha Mar to engage almost three times the number of foreign workers as Atlantis. That circumstance means that Baha Mar is able to construct its facility at a lower cost than Atlantis.
That places Atlantis at a significant competitive disadvantage since the cost of construction drives capital requirements, financing costs, room rates and ultimately profitability. Whatever one’s opinion with respect to Atlantis and Baha Mar, one has to at the very least appreciate that this is a legitimate concern for Atlantis.
Indeed, it really ought to concern all of us since this state of affairs creates uncertainty in the minds of current local and international investors as to whether the government might change the playing field and render their business models not feasible.
This is a very dangerous matter and should not be brushed over in our effort to cause Baha Mar to happen. Atlantis’ investment is already in the ground — it is what it is. A decision by the government should not be the event that renders it less competitive — not in a capitalistic environment.
Some persons have criticized the agreement between Atlantis and the government. However, it needs to be remembered that businesspersons must seek to guard against the kind of risk that Atlantis faces today. Perhaps one is saying that such a deal is not in the country’s interest. The fact is though that no reasonable government should be afraid to execute such a deal since no reasonable government would wish to jeopardize a major investment project.
That said, I believe that the government has a moral responsibility to not grant a better deal to Baha Mar. Foreign and local investors must be able to trust that the government will ensure that the playing field is level at the time of their investment and after as well.
No investor, local or foreign, would wish to invest in an environment of uncertainty. This situation could jeopardize future investments in The Bahamas.
Indeed, Sir Sol Kerzner has already said that Atlantis phase four is unlikely. Already, therefore, the cost of granting Baha Mar 8,100 permits to construct a $2.6 billion hotel is $1 billion in future investments. The question is how many other projects will be deterred?
Moreover, if Atlantis’ phase four project were to reflect the Bahamian labor component that was imposed on it several years ago, they are likely to have engaged 3,500 Bahamians, the same number that Baha Mar will hire.
I also found it rather revealing that the labor cost allocated to the 3,500 Bahamians that Baha Mar intends to engage is $200 million over four years. That equates to $275 per week inclusive of national insurance and other benefits.
What is equally striking is that having increased the Bahamian component by $200 million, the Chinese labor component remains unchanged. Assuming that information is complete, and frankly there is no reason to believe that the Prime Minister was complete, then it simply means that Bahamians will be given contracts to procure materials. Assuming such materials are required to be sourced in China, then this amendment constitutes nothing.
What is more, if it is true that as the Prime Minister suggests, the additional $200 million is intended to move Baha Mar’s cost closer to Atlantis’, then what is the incremental cost of the Baha Mar development?
Now let’s say that Baha Mar makes the argument that its total development cost was not lowered as a result of the favorable labor allocation. That is quite possibly true, but does that make the government’s situation any better? Perhaps not.
Here is why: It is indisputable that the Chinese government’s decision to provide the financing is based on the excessive work permits and the sale of materials for that project. Therefore, the inducement takes place broadly at the level of financing, not at the level of project development cost.
That makes Atlantis’ argument even more compelling since in that instance the issue is not merely the competitive disadvantage that is driven by development cost, but the entire project. In other words, if in the absence the incremental incentives the Chinese would refuse to finance the project, the government has unwittingly given Baha Mar a financing advantage. Atlantis can therefore argue that the entire project represents an abandonment of the agreement, not just the additional labor and land cost that they incurred. Even commercial banks can argue that this deal places a competitive bar on them that they cannot reach.
I do not seek to carry water for Atlantis, much less commercial banks. I simply believe that it is essential for us to consider the consequences of the decisions we make.
The fact is that this arrangement has far reaching consequences. I only wish that the Christie administration and the Ingraham administration had not messed up Baha Mar’s original plans so badly. They owe Izmirlian, Atlantis and the Bahamian people an apology and even their resignations.
I now wish to consider a related but slightly different matter. Bahamians will recall that during the various construction phases of Atlantis, many persons argued that it was inappropriate to grant Atlantis all the incentives that were given. Undoubtedly, there were smaller investors, Bahamians and others, who felt that their business models were being threatened by the Atlantis subsidies or perhaps they felt that they should have received similar incentives, for whatever reason.
I believe a strong argument can be made by those who were aggrieved. That points to the fact that we need to have clearly defined concessions/incentives in order to create a level playing field and remove uncertainty and arbitrariness from the process. The latter leaves too much room for abuse and under the table dealings. Furthermore, deals should not be made in secret and persons who benefit in any way as lawyers, developers, etc., should not vote in our Parliament on these specific matters.
• Lynden Nairn is a Chartered Accountant, and president of Colina General Insurance.
11/24/2010
thenassauguardian
BY LYNDEN NAIRN
At the risk of prejudicing my views on this matter, let me remind your readers that “a bird in the hand is better than two in the bush”.
The Parliament’s decision to unanimously approve Baha Mar’s request for 8,100 work permits is troubling because it appears that all of the relevant factors were not considered or even known.
At the outset, I want to make it clear that Baha Mar has the right to invest whatever amount it wishes, wherever it wishes and whenever it wishes within the confines of our laws.
I also believe that consistent with the tenets of our capitalistic economy, Baha Mar has the right to make good and bad business decisions. It is not right, for instance, to deny approval of a Bahamian project on the basis that it would create a glut of room inventories in the marketplace, even though one would expect investors and their financiers to have regard for that possibility.
The labor issue is a significant problem not only because it robs Bahamians of maximizing their benefits from the project, and not only because on its face it puts Atlantis at a disadvantage, but because it represents a business deal that apparently could not be financed if the financier were not afforded certain privileges.
During Atlantis’ multiple phases, the government thought that it was in the best interest of the Bahamian people to require Atlantis’ labor component to be at a certain level. Undoubtedly, that imposition caused Atlantis to engage labor at a higher cost than it would if that condition did not exist.
A few years later, in order to ensure that financing is secured for a project, the government has decided to allow Baha Mar to engage almost three times the number of foreign workers as Atlantis. That circumstance means that Baha Mar is able to construct its facility at a lower cost than Atlantis.
That places Atlantis at a significant competitive disadvantage since the cost of construction drives capital requirements, financing costs, room rates and ultimately profitability. Whatever one’s opinion with respect to Atlantis and Baha Mar, one has to at the very least appreciate that this is a legitimate concern for Atlantis.
Indeed, it really ought to concern all of us since this state of affairs creates uncertainty in the minds of current local and international investors as to whether the government might change the playing field and render their business models not feasible.
This is a very dangerous matter and should not be brushed over in our effort to cause Baha Mar to happen. Atlantis’ investment is already in the ground — it is what it is. A decision by the government should not be the event that renders it less competitive — not in a capitalistic environment.
Some persons have criticized the agreement between Atlantis and the government. However, it needs to be remembered that businesspersons must seek to guard against the kind of risk that Atlantis faces today. Perhaps one is saying that such a deal is not in the country’s interest. The fact is though that no reasonable government should be afraid to execute such a deal since no reasonable government would wish to jeopardize a major investment project.
That said, I believe that the government has a moral responsibility to not grant a better deal to Baha Mar. Foreign and local investors must be able to trust that the government will ensure that the playing field is level at the time of their investment and after as well.
No investor, local or foreign, would wish to invest in an environment of uncertainty. This situation could jeopardize future investments in The Bahamas.
Indeed, Sir Sol Kerzner has already said that Atlantis phase four is unlikely. Already, therefore, the cost of granting Baha Mar 8,100 permits to construct a $2.6 billion hotel is $1 billion in future investments. The question is how many other projects will be deterred?
Moreover, if Atlantis’ phase four project were to reflect the Bahamian labor component that was imposed on it several years ago, they are likely to have engaged 3,500 Bahamians, the same number that Baha Mar will hire.
I also found it rather revealing that the labor cost allocated to the 3,500 Bahamians that Baha Mar intends to engage is $200 million over four years. That equates to $275 per week inclusive of national insurance and other benefits.
What is equally striking is that having increased the Bahamian component by $200 million, the Chinese labor component remains unchanged. Assuming that information is complete, and frankly there is no reason to believe that the Prime Minister was complete, then it simply means that Bahamians will be given contracts to procure materials. Assuming such materials are required to be sourced in China, then this amendment constitutes nothing.
What is more, if it is true that as the Prime Minister suggests, the additional $200 million is intended to move Baha Mar’s cost closer to Atlantis’, then what is the incremental cost of the Baha Mar development?
Now let’s say that Baha Mar makes the argument that its total development cost was not lowered as a result of the favorable labor allocation. That is quite possibly true, but does that make the government’s situation any better? Perhaps not.
Here is why: It is indisputable that the Chinese government’s decision to provide the financing is based on the excessive work permits and the sale of materials for that project. Therefore, the inducement takes place broadly at the level of financing, not at the level of project development cost.
That makes Atlantis’ argument even more compelling since in that instance the issue is not merely the competitive disadvantage that is driven by development cost, but the entire project. In other words, if in the absence the incremental incentives the Chinese would refuse to finance the project, the government has unwittingly given Baha Mar a financing advantage. Atlantis can therefore argue that the entire project represents an abandonment of the agreement, not just the additional labor and land cost that they incurred. Even commercial banks can argue that this deal places a competitive bar on them that they cannot reach.
I do not seek to carry water for Atlantis, much less commercial banks. I simply believe that it is essential for us to consider the consequences of the decisions we make.
The fact is that this arrangement has far reaching consequences. I only wish that the Christie administration and the Ingraham administration had not messed up Baha Mar’s original plans so badly. They owe Izmirlian, Atlantis and the Bahamian people an apology and even their resignations.
I now wish to consider a related but slightly different matter. Bahamians will recall that during the various construction phases of Atlantis, many persons argued that it was inappropriate to grant Atlantis all the incentives that were given. Undoubtedly, there were smaller investors, Bahamians and others, who felt that their business models were being threatened by the Atlantis subsidies or perhaps they felt that they should have received similar incentives, for whatever reason.
I believe a strong argument can be made by those who were aggrieved. That points to the fact that we need to have clearly defined concessions/incentives in order to create a level playing field and remove uncertainty and arbitrariness from the process. The latter leaves too much room for abuse and under the table dealings. Furthermore, deals should not be made in secret and persons who benefit in any way as lawyers, developers, etc., should not vote in our Parliament on these specific matters.
• Lynden Nairn is a Chartered Accountant, and president of Colina General Insurance.
11/24/2010
thenassauguardian
Saturday, October 2, 2010
Baha Mar project is a political hot potato
Baha Mar project still needs consideration
tribune242 editorial
THE BAHA MAR development is not one of easy solution -- politically it is a hot potato. The only reason it is being considered is that many Bahamians believe that in these economic hard times a big project is needed to get Bahamians back to work -- and Baha Mar happens to be that big project.
Prime Minister Hubert Ingraham does not necessarily agree. One day the Bahamas is going to run out of big projects -- certainly the need for them in New Providence. There are still the Family Islands to develop, but as time moves forward the Bahamas will have to find something other than "big projects" to sustain growth.
Nor does the Prime Minister believe that Baha Mar, even at this time, is the "saviour for the Bahamas."
However, what appears to many Bahamians to be an answer to prayers could present enormous problems in the future. Certainly enormous political problems.
For example, if government agrees to allow the Chinese to employ over the period of the $2.6 billion contract, 8,100 of their countrymen with Bahamians only on the periphery of construction, then future investors can expect the same. Certainly Kerzner International, which has preferred investor status, has every right in future to ask for the same concessions. And don't forget local business people, who should be entitled to employ the best talent for their businesses, will also expect to have more freedom to go abroad if the required talent cannot be found here. This is something that Bahamians should ponder very seriously. At the pace at which this country is developing -- especially with the unlimited vistas being opened by new technology -- there will be no place for D grade students. Of course, this is something for students and their parents to come to grips with now. They have to settle down to reality -- government can no longer protect them. They have not had to make the effort because their mediocrity has been protected by Immigration restrictions for too long.
But there are other worries. As Mr Ingraham pointed out, if Baha Mar is completed as planned will the investors be able to fill the added 3,500 rooms when many hotel rooms already here are empty?
"We will be building the largest single resort development in the country with exclusively foreign labour, foreign labour where there is no transfer of any knowledge to locals," Mr Ingraham said. "At the same time be putting a number of rooms that is larger than any we've got in the country, without any major hotelier being involved to date."
"Well if I have difficulty dealing with less than 1,800 rooms what is it likely to be the case if I put 3,500 rooms there? What makes me feel and what gives me the level of confidence that all of a sudden I've become a magician in terms of the management of a hotel and I'm going to have a very successful operation with high levels of occupancy and good levels of revenue to repay the loan of $2.4 billion?"
Added to which the Chinese now have a hotel in Freeport which they cannot fill.
"And if I am having discussions about the question of repaying a loan of $200 million that is dragging on and on, does that raise any question that I ought to be concerned with? These are all matters that the government has to be concerned with," Mr Ingraham said.
What is now exercising the minds of many Bahamians is what happens to the large resort and the land on which it sits if the land is transferred in fee simple to Baha Mar, which in future might default on the loan to the China Export-Import Bank. Does the bank, and eventually the Beijing government become landlords of 1,000 acres of Cable Beach? This is of great concern to many Bahamians.
Mr Ingraham said he would feel more confident about the development, if like Atlantis, it were brought on stream in stages, opening only 1,000 rooms to start with. Atlantis developed its mega project in three stages. The fourth stage is being held until the Baha Mar resort is resolved. Obviously, the Kerzners -- experts in the resort business --also believe that the Bahamas cannot fill the rooms of two mega resorts operating on one island at the same time.
However, Mr Ingraham believes the Baha Mar project and Atlantis can co-exist without one being detrimental to the other if the phased approach to development is taken.
If one kills off the other by over reaching it is the Bahamas and its people who will suffer. As each resort fights for guests, room rates will fall and so will local employment.
Mr Ingraham and his government -- and the Opposition if it will take its responsibilities seriously -- have a lot to think about as they do their best to protect the future of the country and its people.
October 01, 2010
tribune242 editorial
tribune242 editorial
THE BAHA MAR development is not one of easy solution -- politically it is a hot potato. The only reason it is being considered is that many Bahamians believe that in these economic hard times a big project is needed to get Bahamians back to work -- and Baha Mar happens to be that big project.
Prime Minister Hubert Ingraham does not necessarily agree. One day the Bahamas is going to run out of big projects -- certainly the need for them in New Providence. There are still the Family Islands to develop, but as time moves forward the Bahamas will have to find something other than "big projects" to sustain growth.
Nor does the Prime Minister believe that Baha Mar, even at this time, is the "saviour for the Bahamas."
However, what appears to many Bahamians to be an answer to prayers could present enormous problems in the future. Certainly enormous political problems.
For example, if government agrees to allow the Chinese to employ over the period of the $2.6 billion contract, 8,100 of their countrymen with Bahamians only on the periphery of construction, then future investors can expect the same. Certainly Kerzner International, which has preferred investor status, has every right in future to ask for the same concessions. And don't forget local business people, who should be entitled to employ the best talent for their businesses, will also expect to have more freedom to go abroad if the required talent cannot be found here. This is something that Bahamians should ponder very seriously. At the pace at which this country is developing -- especially with the unlimited vistas being opened by new technology -- there will be no place for D grade students. Of course, this is something for students and their parents to come to grips with now. They have to settle down to reality -- government can no longer protect them. They have not had to make the effort because their mediocrity has been protected by Immigration restrictions for too long.
But there are other worries. As Mr Ingraham pointed out, if Baha Mar is completed as planned will the investors be able to fill the added 3,500 rooms when many hotel rooms already here are empty?
"We will be building the largest single resort development in the country with exclusively foreign labour, foreign labour where there is no transfer of any knowledge to locals," Mr Ingraham said. "At the same time be putting a number of rooms that is larger than any we've got in the country, without any major hotelier being involved to date."
"Well if I have difficulty dealing with less than 1,800 rooms what is it likely to be the case if I put 3,500 rooms there? What makes me feel and what gives me the level of confidence that all of a sudden I've become a magician in terms of the management of a hotel and I'm going to have a very successful operation with high levels of occupancy and good levels of revenue to repay the loan of $2.4 billion?"
Added to which the Chinese now have a hotel in Freeport which they cannot fill.
"And if I am having discussions about the question of repaying a loan of $200 million that is dragging on and on, does that raise any question that I ought to be concerned with? These are all matters that the government has to be concerned with," Mr Ingraham said.
What is now exercising the minds of many Bahamians is what happens to the large resort and the land on which it sits if the land is transferred in fee simple to Baha Mar, which in future might default on the loan to the China Export-Import Bank. Does the bank, and eventually the Beijing government become landlords of 1,000 acres of Cable Beach? This is of great concern to many Bahamians.
Mr Ingraham said he would feel more confident about the development, if like Atlantis, it were brought on stream in stages, opening only 1,000 rooms to start with. Atlantis developed its mega project in three stages. The fourth stage is being held until the Baha Mar resort is resolved. Obviously, the Kerzners -- experts in the resort business --also believe that the Bahamas cannot fill the rooms of two mega resorts operating on one island at the same time.
However, Mr Ingraham believes the Baha Mar project and Atlantis can co-exist without one being detrimental to the other if the phased approach to development is taken.
If one kills off the other by over reaching it is the Bahamas and its people who will suffer. As each resort fights for guests, room rates will fall and so will local employment.
Mr Ingraham and his government -- and the Opposition if it will take its responsibilities seriously -- have a lot to think about as they do their best to protect the future of the country and its people.
October 01, 2010
tribune242 editorial
Tuesday, June 22, 2004
The Bahamas Prime Minister, Perry Christie says He would Like to See a Five-star Development on Cable Beach to Complement the Five-star Paradise Island Development and the Planned Upgrades to the Nassau International Airport
Kerzner International Executives Fear “destructive” Competition in the Idea of Five-star Developments on Cable Beach
Christie Touts Cable Beach
22/06/2004
Prime Minister Perry Christie has admitted that he is not minded to encourage Cable Beach to target mid-market tourists, as is the wish of Kerzner International executives.
Kerzner officials have made it clear in recent weeks that while they are not against competition, Atlantis and Ocean Club, not Cable Beach, should target high-spending visitors.
“As prime minister, I have indicated to the Kerzner family and to its board of directors that my government values their investment to date,” Mr. Christie told the Journal recently. “They know, the Kerzners, that we have a problem with Cable Beach. They know that there has to be radical improvement to the product of Cable Beach.”
Kerzner CEO Butch Kerzner has said that improving Cable Beach would be good for the destination, but he has also said that any development for that area should not directly compete with Paradise Island.
Mr. Christie said, however, he and his government would find it difficult to turn down any investment for Cable Beach that would be five-star quality.
“We live in a country where the challenge for the government, if we are to listen to advice, is how do we go about when an investor buys a property and decides with his money that he wants to spend $5 million, how do we tell him to spend 2? How do we do that? That is the difficulty that we face,” he said.
Mr. Christie said he would like to see a five-star development on Cable Beach to complement the five-star Paradise Island development and the planned upgrades to the Nassau International Airport, which will also make it a five-star facility.
“That is what I saw, being able to facilitate this significant increase in tourism to New Providence,” the prime minister said.
He said he will deal more intimately with Kerzner’s concerns at it relates to “destructive” competition after he addresses other more pressing issues.
Mr. Christie said he is focused on selling the Radisson Cable Beach Resort and securing $10 million for the Treasury.
“Until such time, therefore, as I am informed that there is an agreement to buy the hotels on Cable Beach, I need not focus on anything other than the sale of the Radisson,” he said.
The prime minister also said that the owner of the Wyndham Nassau Resort and Crystal Palace Casino Phil Ruffin has not agreed to sell his property, so the government is a good distance away from addressing the debate evolving over competition.
“If in the process we are able to cause there to be a wonderful development at Cable Beach, we would cross the bridge that has been put in my way, when we come to that, if we have to,” he told the Journal.
Mr. Kerzner said in a release last week that, “If done correctly, redevelopment will expand the size of the pie rather than us all fighting for the same slice of the pie. It is the difference between constructive as opposed to destructive competition. Where overbuilding has taken place in one market segment the result has been failure.”
Friday, May 7, 2004
Standard & Poor’s (S&P) Has Placed Kerzner’s Atlantis Paradise Island Resort on a Credit Watch List with Negative Implications
If Kerzner was to sell additional debt, it could face higher interest rates
Kerzner On Credit Watch List
07/05/2004
Kerzner’s plans to carry out a $1 billion expansion of its Atlantis Paradise Island Resort has prompted the international credit rating agency, Standard & Poor’s, to place the company on a watch list that could mean a downgrade.
S & P said in a release Thursday that it placed its ratings on Kerzner, including its BB corporate credit rating, on CreditWatch with negative implications.
One analyst explained to the Journal Thursday from New York that if Kerzner were to sell additional debt, it could face higher interest rates.
Several weeks ago, Kerzner announced that it was selling off some of its debt to raise millions of dollars to help fund its Atlantis expansion.
Peggy Hwan, another S & P analyst quoted in the release said, “The rating action follows the company’s announcement that it has further increased spending associated with its Phase III expansion project for Atlantis on Paradise Island, Bahamas.
“Given the greater spending, in addition to the company’s previously announced growth initiatives, debt leverage is now likely to increase beyond Standard & Poor’s expectations.”
In resolving the CreditWatch listing, Standard & Poor’s will meet with management to further discuss its spending plans, operating performance, and long-term growth and financing strategies.
Standard & Poor’s said it has determined that if a downgrade were to occur, it would be limited to one notch, to a BB-.
When the company first came to The Bahamas a decade ago, it faced difficulties in raising the $80 million to fund its initial phase of Atlantis, according to CEO Butch Kerzner, who spoke at the 10th anniversary celebrations Wednesday night.
But a lot has changed since then, Mr. Kerzner indicated.
“I was having a discussion with our bankers…and it was amazing to me the transition from when we started 10 years ago when we were really scratching around for the $80 million to build the first phase,” he said. “It ended up being $140 million…today, literally on telephone calls we can raise $500 million for this next phase through our banks and we’re talking about the biggest banks in the world.
He added, “We don’t even address the question about The Bahamas or Bahamian risks. Those issues are gone and that’s a big deal.”
Tuesday, January 13, 2004
The Bahamas Prime Minister, Perry Christie in Talks with Investor Interested in Pumping $1 Billion into Cable Beach
The Bahamas Government and The Investor are Reportedly in The Final Stages of Negotiations for Cable Beach Properties
Big Money For Cable Beach
13/01/2004
Prime Minister Perry Christie is expected to spend some time in Monterrey, Mexico negotiating for the redevelopment of the Cable Beach Strip, while attending a special Summit of the Americas.
Government officials, including the prime minister, have recently been pointing to the urgent need to improve conditions at properties on Cable Beach.
Mr. Christie announced recently that he is talking to an investor interested in pumping $1 billion into Cable Beach.
The government and the investor are reportedly in the final stages of negotiations and a heads of agreement was being prepared for signature for a development along the Strip.
Meanwhile, saying that he has no immediate plans to sell his resort, owner of the Wyndham Nassau Resort and Crystal Palace Casino Phil Ruffin said Monday that he is taking out a new loan on the property to carry out much needed upgrades.
Mr. Ruffin, in an interview with the Bahama Journal from Wichita, Kansas, said he is aware that the Cable Beach Strip needs to be revitalized and refinancing would help his company secure the cash it needs for the improvements to take place.
"It will give us $25 million in surplus cash to upgrade the property," he said.
The Wyndham is in deep debt and in an apparent bid to get value on his property; Mr. Ruffin wants to invest millions of dollars into it.
Some sources insist the government is in the process of forcing Mr. Ruffin out and he is said to be looking for the best deal to get out.
Mr. Ruffin, one of the richest people in America with an estimated net worth of $750 million, said the new loan should be in place by the end of the month.
His hotel continues to face crushing competition from the Atlantis Paradise Island Resort, owned by hotel mogul, Sol Kerzner.
Mr. Ruffin said he is aware of such competition and that business has been "horrible" over the last couple years.
Meanwhile, Atlantis, which is now undergoing a $600 million expansion, has been reporting record profits.
Mr. Ruffin told the Journal that things are finally beginning to pick up.
"It's coming back," Mr. Ruffin said. "I think sales are up 32 points in 2004 and the bookings look good. That's when you start doing things."
Speculation has been rife about the planned sale of the Wyndham, but Mr. Ruffin said no contracts to that effect have been signed.
"We have a couple of people kicking the tires, different companies," he said. "But at this time there is no formal offer."
But Mr. Ruffin added, "We're always open to the sale of any of our assets if the price is right."
He also responded to an exclusive report in the Bahama Journal several months ago revealing that his hotel owes the government more than $10 million in casino taxes.
When asked when he intended to pay, Mr. Ruffin said he didn't think that was a relevant question to be asked of him.
But he did say, "It'll be corrected."
Mr. Ruffin then added, "We paid full taxes for 10 years, while Atlantis paid half. They had a significant advantage over us."
The Ruffin name is also a big name in gaming circles in Las Vegas. He told a local paper there that he favours the argument that gaming has carried the bulk of the tax load for too long.
Mr. Ruffin also reportedly owes the Bahamas Electricity Corporation millions of dollars in unpaid bills.
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