In a Ministerial Statement Mr Dickinson announced the execution of the Government guarantee on behalf of Hotelco Bermuda Holding Ltd.
The Government gave an undertaking to support the financing of the construction of the St Regis Bermuda Hotel by “providing a guarantee for up to $25 million of the estimated project cost of $160 million.”
In follow up to the development agreement signed with Hotelco before the groundbreaking ceremony in 2017, he said the guarantee facilitates loans to finance development costs and expenses related to the construction of the resort.
Under the guarantee the Government cannot be legally required to fund more than $25 million to repay the lender should Hotelco be unable to fulfill its obligations.
“The financing being guaranteed is provided under a loan facility maturing in 15 years.”
The Government would be compensated for providing the guarantee.
“Also of note is the fact that initially the developer invested a greater sum of their own equity capital into the project and is a sign of good faith and a show of confidence, by the developers, in the viability of the project.”
The Government guarantee relates to the bank loans and not the developer’s equity.
“It is important to note that the Government will be compensated for providing the guarantee. Also of note is the fact that initially the developer invested a greater sum of their own equity capital into the project and is a sign of good faith and a show of confidence, by the developers, in the viability of the project.
“This project has and continues to provide jobs for Bermudians in the construction phase as well as jobs for Bermudians once the facility becomes operational,” said Mr Dickinson.
He also highlighted “a little bit of background” on the Hotelco Group:
- The origin of Hotelco goes back 60 years, when it started in Venezuela as a construction company and real estate developer of housing and commercial projects. The company went international at the beginning of the 2000s
- In the 1990s the company switched the main focus of its business to the development and direct construction of hotel properties
- Hotelco has built five hotels with a total of 1,160 rooms, all of them operated by Marriott International under its various brands
- The portfolio of current developments of Hotelco includes a Ritz Carlton Resort in Providenciales , Turks & Caicos Island (129 rooms and 72 residences), a St Regis Hotel and Residences in Aruba (127 rooms and 56 residences) and the St Regis Resort in Bermuda (120 rooms and 102 residences)
- It is the philosophy of the company to hold the ownership of the hotels for the long-term
“To be clear, the Government guarantee is in relation to the bank loans and not the developer’s equity, therefore the Government’s actual contingent liability only exists in line with the Banks loan,” the Minister added.
Funding arrangements for the project are as follows:
- The first $35 million of the project cost was funded with equity capital
- The next $125 million will be funded between equity and the bank loan
- 62.5% or $100 million will be funded with equity capital
- 37.5% or $60 million will be funded with a bank loan
- The Government’s guarantee is limited to $25 million of the bank loan
While casinos are not legal in Bermuda yet, he said the new resort “will include a casino, spa and golf resort”.
Moving forward, he said the resort “will potentially provide for many opportunities for local residents and businesses to participate first in the construction of the development and eventually in the running of this tourism facility in the East End”.