Feb 28, 2013 News Comments Off on Marriott investors confirmed, but still unnamed
… only US$8M gap remains – Luncheon
The government has secured the key investors needed to fund the Marriott Hotel Project, Dr Roger Luncheon said yesterday, but no details have been revealed.
The government has so far been pouring taxpayers’ money into the US$52 million project. In total US$27 million is expected to come from investors for the main property and another US$8 million for the casino, nightclub and restaurant.
Dr Luncheon told Kaieteur News that the only gap in funding at the moment is the US$8 million.
The rest of the money is coming out of the coffers, and when construction is completed, Marriott International is expected to bring in a management team to run the hotel.
The financing structure for the hotel locks in private investors for a return of their dollars but taxpayers’ money risk being washed away if the ambitious project fails.
Finance and industry sources say the project is a high risk one, given that existing hotels are struggling to fill their rooms, but Government is pressing ahead and could end up putting US$21 million ($4.2 billion) into the project.
The arrangement for financing includes “senior debt” syndicated by Republic Bank (Trinidad and Tobago) of US$27 million.
A syndicated loan is one that is provided by a group of lenders and is structured, arranged and administered by one or several commercial banks or investment banks. In this case, the loan is being administered by the Republic Bank (Trinidad and Tobago Limited) but the government has not named the other lenders.
By agreeing to this type of loan arrangement, the government is agreeing for the investors who are part of the syndicate, to get back their investment first ahead of any other investor in the project.
So, if in a scenario where the project fails and the value of the property depreciates to a value below what the investors have plugged, then the investors will get back their money, and there would be nothing to return to NICIL, meaning that taxpayers’ dollars would go down the drain.
The Minister of Finance announced that the government will participate in the project, by way of equity, in the sum of US$4 million. This was committed by National Industrial Commercial Investments Limited (NICIL), the investment arm of the government which holds its assets.
The equity contribution determines the government’s strength in Atlantic Hotels Incorporated – the company created to see the project through. As it stands, the government is currently the sole shareholder in the company.
However, apart from the equity contribution, financing for the project is also coming from “subordinate loan stocks” of US$15 million invested by NICIL. Adding the US$2 million NICIL will end up spending in development costs for the project, including design and other preliminary studies altogether, NICIL will be putting US$21 million into the project.
Apart from the “senior debt” and the money envisaged by NICIL, the government is looking for an investor or a group of investors who will put another US$8 million into the project.
Once one or more private investors are selected, the party/parties will need to be approved by Marriott and Republic Bank, given that the 67 per cent shareholder will be deemed to be the majority partner.
The pessimism about the feasibility of the project stems from the fact that many of the country’s hotels concentrated in and around the capital and built for Cricket World Cup 2007, are operating on less than favourable occupancy rates.
The Finance Minister Dr Ashni Singh had said that there was a market feasibility study conducted by the Marriott Hotel Group and one conducted in 2010 by an independent American firm which is being updated for 2012.
The American firm was not named, nor was the study by Marriott released.
He said that there is also a draft Environmental and Social Impact report which is awaiting final issuance by the Environmental Protection Agency (EPA).
“These documents are confidential at this time; however, the government is willing to have a closed door presentation that will allow certain details of these documents to be made available under the condition of utmost confidentiality and discussed with key parliamentary opposition members without these documents being made public,” Dr. Singh previously said.
The opposition has voted to halt public funding of the project and they say they want the so-called confidential documents released to the public.
The government, under Atlantic Hotels Inc. has entered into a contract with S.C.G International of Trinidad (a subsidiary of Shanghai Construction Group, China) to construct the hotel.
The Marriott Hotel group, through one of its subsidiaries will manage the hotel in accordance with standard Marriott rates per annum. The management fee would be a percentage of gross revenue with an incentive fee being a percentage of operating profit as well as other fees based on services.
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