NICIL purposefully took minority share in Marriott
…investing more meant more debt responsibility – Dr Singh
Finance Minister, Dr. Ashni Singh, has defended the use of the Public Private Partnership (PPP) financing model in the pursuit of large scale infrastructure projects in the case where Government would find it difficult to finance the entire project.
Finance Minster Dr Ashni Singh
The PPP model was used to pursue the construction of the US$58M Marriott Hotel. When it was pointed out that the Government-owned National Industrial and Commercial Investments Limited (NICIL) did have enough finance available in order for it to have controlling interest in the project, Dr. Singh said that had that route been taken, then NICIL would have also owned a greater portion of the debt. Marriott is being built through debt and equity using the PPP model. NICIL and ACE Square Investment have invested a combined US$12M in equity and have proportionally taken on the responsibility for the monies borrowed to build the project. The loans have been directed to Atlantic Hotel Inc (AHI), the special purpose company created to build and own the Hotel. NICIL has invested US$4M to have 33 per cent ownership and ACE Square Investment invests US$8M for 67 per cent ownership of the US$58M hotel. Dr Singh had premised the private aspect of the financing as a result of unavailability of fund from Government but while NICIL has invested US$4M in the project it has also loaned the project US$15.5M at a zero percent interest if the cash flow enables. This means that Government-owned NICIL had available to it US$19.5M to put into the project but opted to only use US$4M as an investment. This means that NICIL had more than enough funds available to it to invest more
in the project to have majority ownership in the Hotel. Dr. Ashni Singh’s explanation however is, had it invested more, then it would have been responsible for more of the debt to be repaid through the earnings of the hotel. Several stakeholders, recently, have been extremely critical of the way the project has been structured allowing a private investor to put US$8M in a venture and take control of the US$58M Hotel. NICIL has argued that the private investor is only entitled to 67 per cent of the net assets which is only US$12M. It said that the net asset is the total assets minus total liabilities. The total assets amount to US$58.5M.
The total liabilities according to NICIL is US$46.5M which consists of loan financing arranged by Republic Bank to the tune of US$27M, outfitting loan for the Entertainment Complex at US$4M and NICIL’s loan, US$15.5 M. NICIL claims that the private investor, British Virgin Islands registered, Square Ace Investment Inc will only be entitled to ownership of the US$8M that it has invested but what the company did not say is that if and when the loans have been repaid, the private investors remains in control of 67 per cent of the entire project. When the total loan stock is paid off, the private investor will be in control of 67 per cent of the total assets which will be the US$58M hotel with no debt, making that hotel the net asset of the company.
