Barbados Hotels and Resorts debacle continues with another government loan guarantee. Where did all the public money go?

barbados-gems-hotel-scandal.jpgGEMS scandal keeps going and going and going…

Say ‘goodbye’ to your tax dollars as government guarantees a loan with zero hope of repayment.

Adrian Loveridge, small hotel owner.

Adrian Loveridge, small hotel owner.

Whatever was behind any honest intentions of the Hotels and Resorts Limited (HRL) or the “GEMS” debacle, it is difficult to imagine a worse outcome so far.

Government’s decision to guarantee yet another loan to this failed entity, despite the current austerity situation, frankly defies belief and clearly will not have a happy ending.

This latest loan is for BDS$5.55 million at an interest rate of 7.75 per cent, arrangement fee of $350,000 and monthly repayments of $55,000.

Included is a $300,000 overdraft facility which attracts an administration charge of $5,000 each month.

HRL now operate a single hotel – Blue Horizon with just 67 rooms. Another 50 additional rooms acquired at the time of purchase (1997) remain derelict all these years later. Savannah and Time Out at the Gap are leased and operated by private sector interests.

Where did the money go?

Three other properties originally in the GEMS portfolio were sold and it still remains unclear what price they realised and exactly where those funds went.

Despite repeated pledges of transparency and accountability, apart from a tiny private shareholding, the sole owner of HRL (the Barbadian taxpayer) is left almost completely in the dark. Statutory corporations appear not to have any obligation to publish their annual audited accounts, unlike publicly traded companies.

Let’s just look at this particular latest bailout first.  To meet the monthly commitment, based on a typical 60 per cent average annual occupancy, interest and capital repayments alone will amount to $49.75 per occupied room night. Put another way: 23 per cent of the rooms have to be filled at published summer rack rate (before taxes), just to meet the new debt burden. That’s before any operational or maintenance expenses.

Unless a substantial proportion of their room stock is heavily discounted and sold through tour operators, it is implausible that occupancy levels will improve as direct booking consumers become more aware and use benchmarks like TripAdvisor to monitor previous guest’s satisfaction level.

Blue Horizon is currently positioned at #74 out of 102 Barbadian Hotels on TripAdvisor with a reviewer’s firsthand experience rating of just 49 per cent out of a maximum 100 per cent achievable.

Simply expressed; over half of previous guests who have posted their personal observations would not either return or recommend Blue Horizon hotel to a friend.

Clearly, from comments made, the property urgently needs to be upgraded.

What other economic liabilities are in the GEMS closet?

In an article headlined ‘Reports free of scandal’ published in the Nation on 28th March 2013, Senator Maxime McClean stated ‘that the Government of the day by way of an Agreement dated 22 July 2002, loaned Hotels and Resorts Limited more than $145 million’, adding ‘that was not being serviced and the Cabinet had agreed to debt relief for HRL by way of a write-off of $160 million’.

By January of last year, the Auditor General’s report to Parliament contained the following comments, ‘Given the poor finances of this entity, it was always unlikely that repayments would have materialised… The outstanding balance on this loan was reported as $85.4 million at 31st March 2012 with accumulated interest of $30.4 million’.

So even after the previous massive ‘write-off’, there still remains this huge deficit.

Back in February 2010, then Minister of Economic Affairs, Dr. David Estwick, placed an estimated book value of all the GEMS owned properties ‘at only $74 million’.

Under current trading conditions, it is doubtful that ‘value’ has increased, or the circumstances improved sufficiently in which to service any more debt.

So why is Government guaranteeing the loan?

Also see Adrian’s November 24, 2013 post Barbados Government is the largest hotel operator in the country

16 Comments

Filed under Barbados, Barbados Tourism, Economy, Freedom Of Information

16 responses to “Barbados Hotels and Resorts debacle continues with another government loan guarantee. Where did all the public money go?

  1. RLL

    The GEMS scandal does keep going and going!

    Is the government protecting someone? It doesn’t make sense to throw all this good money after bad.

    Blue Horizon is a first class dump. Why does the government keep throwing money at it? There must be something we are missing.

  2. We are missing integrity, transparency, accountability and freedom of information ! Funny how such legislation has gone nowhere after the election ! But fear not ! It will be resurrected just before or during the next election only to die again, after the election !

  3. akabozik

    This financial crisis has been coming for a long time. The in-crowd knew it was coming and they have their money offshore by now, swiss banks, marshall islands, caymans, take your choice.

    A devaluation is coming. No question, no doubt about it, but they already have their money off the island.

    Now we know why ‘they’ didn’t want any transparency or integrity legislation.

    Now we know: devaluation coming down that track like an out of control steam locomotive. No stopping it. No stopping it at all.

  4. fees and write offs to be absorbed by broke countries and taxpayers

    There must be something we are missing?

    nothing missing here, same old, same old

    The real question is who lent the money and who got the fees for something that can’t be economically justified?

    Which individuals specifically benefitted from this continuing fraud? Don’t
    tell us an organization did this? Behind every corporation and organization
    are unaccoutable racketeers.

  5. PLANTATION DEEDS FROM 1926 TO 2014 , MASSIVE FRAUD ,LAND TAX BILLS AND NO DEEDS OF BARBADOS, BLPand DLP=Massive Fruad

    fees and write offs to be absorbed by broke countries and taxpayers
    January 6, 2014 at 3:52 am @ We agree and take a look at the land and the owner, and who they bought it from , The Fraud started with the land and grew up to a fraud hotel ,and Fraud loans to fix and to buy and all we can say is goodbye, Money gone , crooks still here , Money laundering , racketeering ,As you can see they all will soon have to eat road Kill,
    PLANTATION DEEDS words are now being seen all at once and can not be talked away.Bank robbery from the Inside , Just bigger than the 1million missing that walked out the Door of the Bank.
    Welcome to the Land of Crooks, Liars and Scumbags

  6. Anonymous

    All that happen is that the money they used to pay ppl to vote is what they taking out of the ppl’s hide now so that they can keep buying their big jeeps and keep their overseas shopping sprees. right now they barely inviting sandals in so they can get more in their pocket.

  7. Wily Coyote

    @RLL “There must be something we are missing.”

    Most of us can see the missing, it’s call CORRUPTION.

  8. Betty Cooper

    I wish somebody would reopen the Edgewater, That place is the most beautiful spot on the Island! I have been there 5 times, but since it has closed there is no need to return to Barbados!! So Sad!

  9. Due Diligence

    Interesting article Crane Turns to Jamaica in the Nation at
    http://www.nationnews.com/articles/view/crane-turns-to-jamaica/

    Butch turns to Barbados’ taxpayers to fund the cost of building Beaches.

    HRL turns to Barbados’ taxpayers to fund its losses

    Paul Doyle turns to private investors to help fund the cost to get the Beach Houses at Culpepper [St Philip] started. What a novel idea – a private placement. Wonder if Butch will pick up a piece of that action

  10. Sunshine Sunny Shine

    You think the DLP are not going to get their big fat share of this loan. RIght now they got to get all they can get before the real shit hits the fan.. If do not believe me ask Crooked Duguid. Right now he up in Canada living off of all that money he laundered and laughing his ass off big shot style and nitwits who live in Barbados.

  11. Same old, same old

    The fundamental problem is not the corruption. We will always have corrupt people in government and the civil service and in business ready to take advantage of this reality. The real problem is that we have no rules and laws against corruption and not even the most basic freedom of information to allow the public and the press to uncover and prove corruption.

    David Thompson promised the legislation, but he lied and he was corrupt himself as we saw when he hid money for his pal Parris.

    The current financial crisis is the natural result of two decades of increasing corruption stripping every last dollar in foreign exchange and the public purse. Stuart, Mottley, Arthur, Thompson: makes no difference without the laws and FOI.

  12. The majority of Members of Parliament are lawyers whose primary interest is personal gain and self-enrichment. Many of these same lawyers are of unsavoury reputation ,not well known for honesty and integrity, and do not hold themselves to be accountable to anyone…not even the Barbados Bar Association ( which also has its problems).
    Let’s face it, BLP and DLP members are not interested in passing integrity, transparency, accountability or freedom of information legislation which will inevitably impact upon or curtail the widespread corruption etc.
    There is a crying need for a new political party…one that will, hopefully, champion the importance and value of integrity, transparency, accountability and freedom of information, as essential tools of good governance.
    Until we wake up and such a party emerges, our self-inflicted exploitation and suffering will continue unabated and even worsen.
    The people will continue to be exploited by the “governing elite” which will never pass “integrity,transparency,accountability,and freedom of information legislation”.

  13. Rocketman

    I’m getting out of here the first chance I get. I’m 19 years old and I have my future to think about. Anyplace is better than this bankrupt island.

  14. Kentucky bone cracka

    All a wunna jus talkin, i bet if any of you all were given say $5.m for a social program wunna wud b in miami shoppin and pushin big rides too. So insted of just talkin shit pun a blog be proactive, ga out dey an wen ya see chris or mia now step out dum big ride just look dum dead in dum eye and pull out d biggest knife in barbados, kneel down, slash a tyre and dig out summa d paint….ya mite feal better

  15. gentle jim

    @rocketman: You sound like quite a few people who I have heard lately who can afford it.

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