By NEIL HARTNELL
Tribune Business Editor
The Government was yesterday warned that it “will have a national disaster on their hands” unless it immediately acts to take over the Grand Lucayan resort via compulsory acquisition.
Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, told Tribune Business that the Minnis administration needed to “act very forcefully” with the resort’s Hong Kong-based owner to rescue an economy that is “on the brink”.
He suggested that failing to move could lead to a further downgrade of the Bahamas’ sovereign credit rating, and added that the Government should not wait for the long-promised ‘trade off’ of the $300 million Phase V expansion at the Freeport Container Port.
Mr Leonard suggested this was unlikely to occur, and argued that the Bahamas could not afford to keep hanging on for ‘a red herring’ and tread softly over the Grand Lucayan.
“They have to act very forcefully,” Mr Leonard told Tribune Business. “First of all, Grand Bahama desperately needs it, and if Grand Bahama fails – and it’s pretty close to the brink of doing that – we will probably get a downgrade from the credit rating agencies.
“The Government needs to let them [Cheung Kong Property Holdings, the Grand Lucayan owner created by Hutchison Whampoa’s split] know that they cannot just shut down a major property and get away with it. The Government needs to be extremely firm.”
Mr Leonard said the Container Port expansion, awaited since 2014-2015, was “unlikely to occur”. He also noted the $450 million investment into freight services at Cuba’s Mariel port, which is being managed by PSA International – the Singapore firm that holds a 20 per cent equity stake in Hutchison Port Holdings, according to media reports.’
“The expansion of the Container Port, I feel, is highly unlikely to occur,” he told Tribune Business. “They’re not going to do an expansion unless they get a guarantee they’ll get ‘y’ extra amount of freight going through it and, if they don’t, why invest $250-$300 million?
“My understanding is they have no guarantee. Treating them nicely at the hotel and waiting for the potential expansion is not realistic.”
Mr Leonard said the sheer scale and importance of CK Property Holdings/Hutchison’s economic assets, in comparison to the overall Grand Bahama economy’s size, meant it was essential they succeeded for the island’s well-being.
“The size of the economy is such that we cannot afford for companies like that not to perform,” he told Tribune Business. “If they can’t perform, we have to get somebody else to do it.
“What this means is that the Bahamas government should have no qualms about Compulsory Acquisition of the hotel properties at a price that is lower than the one Hutchison is looking for.
“The Government must act now or be seen, whether justified or not, as being responsible for the collapse of Grand Bahama…. It would also put Hutchison on notice that they should consider the size of the Bahamian economy into which they have invested and the consequences. Quite simply put, unless the Government acts now they will have a national disaster on their hands.”
The Prime Minister indicated in his national address that the Government was prepared to take a part-equity stake in a new Grand Lucayan ownership group to get the property open again, and Bahamians employed, likening such a move to the US/UK auto and banking industry bail-outs in 2008-2009.
A compulsory acquisition, as suggested by Mr Leonard, would have potentially negative ramifications for the Bahamas’ international investment reputation, but some observers would argue it is necessary to prevent Freeport’s economic collapse.
The Grand Lucayan’s prolonged 11 month closure has cost the island 59 per cent of its hotel room inventory, and other resort operators have warned the island’s tourism product will not recover if the property does not open in time for the winter 2018 season.