Brassington misleads nation on Marriott deal
Govt. is indeed guaranteeing private investors-Opposition Parties
Pull Quote: “Yes, Government is offering a guarantee….We are putting up monies for other people but their money will have priority and that is obnoxious,” Ramjattan
A senior government official may have been attempting to mislead Guyana over details of the
Marriott Hotel deal, with opposition parties now vowing to raise even more questions in Parliament.
Both the A Partnership For National Unity (APNU) and the Alliance For Change (AFC), which make up the Opposition in the National Assembly, believe that despite statements by Winston Brassington, head of the National Industrial and Commercial Investment Limited (NICIL), Government is in fact offering guarantees to a number of yet unknown private investors that could see them recovering their investments ahead of the government using taxpayers’ money, should the project fail.
The implications of that is despite Guyana’s intention to invest US$27M into the project, its name would not be first on the list to be repaid.
The multi-million dollar project has come under fire especially as Guyana continues to struggle with problems to fill the many empty rooms that plague hotels across the country.
Over a week ago, Brassington, during an interview with Kaieteur News, said that there is no Government guarantee on the US$27M debt that is being facilitated by Republic Bank (Trinidad) for the Marriott Hotel project.
Government has entered into a syndicated loan arrangement where Republic Bank (Trinidad) is managing the process. The particular loan is one that is provided by a group of investors and which through an agreement will allow the investors who are part of the syndicated loan arrangement to get back their monies ahead of any other- in this case, ahead of Guyana which is plugging a massive US$27M into that project.
According to Carl Greenidge, APNU’s Parliamentarian and former Finance Minister under the People’s National Congress (PNC), it may be a case of the NICIL’s head playing with words.
“You can in some instances decide that you can give a formal guarantee. You write a formal guarantee so that in the event that certain rate of profit is not achieved… you (Guyana) are going to make up the difference- that is a formal guarantee.”
In this case, where Government is clearly issuing “preference shares” or “preferred shares” “it seems to me that they (the syndicated loan investors) have first claims on any income or any profits that are associated with the company and in any event of a collapse or it is wound up, they have first claims on the resources.”
According to the Parliamentarian, the extent of the risk that Government will bear will depend on the Management Agreement that is signed.
“…And we have not seen that; and that is really at heart of the story. The wider question is why would a government in circumstances where you have excess capacity in terms of hotel room occupancy, why would it want to provide a de facto guarantee in those circumstances?”
The official stressed that incentives are more often than not provided to hotels and others to boost occupancy rates of rooms which in ordinary circumstances are below expectations.
“…We have over capacity given the number of tourists we have…given the amount of visitors we have. I once again come back to a fear that the government is using an economic instrument like this… using the state’s resources, to give land to a business, to give a de facto guarantee to a business, monies…taxpayers’ monies to a business (and) is abusing economic policies.”
Alluding to perceptions that government may be attempting to compete with the Pegasus, Greenidge made it clear that taxpayers’ money was involved.
“If you are upset with (Robert) Badal (owner of The Pegasus), because Badal has a hotel that you did not want him to have, the way to deal with that is not through this instrument. These are taxpayers’ resources and in the end NICIL’s resources were never intended to be used in this way.”
NICIL is the state’s agency for handling investments for Guyana. It is said to have billions of dollars in its purses with increasing pressure for that money to be handed over to the Government’s central account- the Consolidated Fund.
The Parliamentarian also said that the recently released documents by Government on the Marriott deal are incomplete. Last week, APNU through Greenidge, and during the 2012 National Budget debate, expressed more concerns over the project. The coalition will continue to raise questions and address the issue in the National Assembly, the official said.
AFC’s lead Parliamentarian, Khemraj Ramjattan, was very clear also that government is not a priority investor in the project which is to be built in Kingston, west of The Pegasus.
He said that the other private investors, from the information available, would get priority. “That was made very clear. And we knew that.”
What makes the deal more questionable is the fact that it is NICIL’s money (taxpayers’s dollars) that will be used for the equity, he said.
According to Ramjattan, Government has already plugged US$6M into the project. This includes US$2M for the design which was done by a US-based Guyanese, Mike Ahmad, and another US$4M for preparatory works.
“Assuming that the property is built and it becomes bankrupt and is sold for only US$25M… what that means is that the syndicated people who put money into it will collect first. If they put US$25M, they will get US$25M and we will get nothing.
“Government is offering a guarantee. We are putting up monies for other people but their money will have priority and that is obnoxious.”
The proposal is to build a 197-room hotel on an eight-acre plot of land in Kingston. SCG Shanghai Construction Group International (Trinidad and Tobago) was awarded the contract. Atlantic Hotel Inc (AHI), the company the government has formed to establish the hotel, has proposed a 22 per cent equity.
It is expected that the project could cost up to US$60M to build.