By the time all of the extra fees are factored in, Finance Minister Curtis Dickinson says the $165 million guarantee signed by the former administration will end up costing local taxpayers “close to $170 million”.
The Government payout to lenders is due this week for the Morgan’s Point development at the former US Naval Annex in Southampton.
On Monday, the Minister also stated that the local construction firms left unpaid for work already completed before financing dried up will be compensated.
This after he tabled legislation last Friday, to raise Bermuda’s debt ceiling by $250 million, up to $2.75 billion. A $200 million credit facility was also negotiated with local banks.
Part of that money will cover costs for the Government to obtain advice and restart the development at Caroline Bay.
As a result of the guarantee, the US lenders are owed $85 million, with another $3 million, at least, in prepayment penalties for paying off the loans before their maturity.
Arch and Axis reinsurance are due $75 million of principal and another $5 million guaranteed to cover unpaid interest.
According to the Minister, “a formal announcement” will be made once the transactions are done.
“This process involves lawyers for the Government, for lenders, and there are agreements that need to be executed,” he said.
“There is also financing with the local banks; there are credit facilities that need to be negotiated, which, by and large, have been done.
“We’ve gone as far as having signed signature pages; we’re well on our way.”
None of the above guarantees that work will resume at Morgan’s Point, but it does mean that the Government has traded places with the backers to become the lender, although ownership of the property and the proposed resort remains unchanged.
“Unfortunately, it doesn’t. The fundamental issues with the project remain. They need financing,” said Mr Dickinson.
“The lenders’ money and equity has been used in support of the work that’s been done. Those funds were not sufficient to complete the project,” he added.
“We have to set up the process and evaluate claims and then make payments. When we’re in a position to communicate how that will work, we will do that.”
Amid speculation that he increased Bermuda’s debt ceiling to fund the Government’s current budget, he said: “That is completely untrue.
“In fact, we will be releasing, in the coming days, the first quarter of the 2019-20 fiscal year performance numbers,” he said.
“We are on budget, and tracking as we thought. We have borrowed no additional monies to fund Government.
“It is working capital. We have not increased debt. Things are moving as we had planned.”
He also said that he was “confounded” by criticism levelled by the former Minister of Finance under the One Bermuda Alliance administration, Bob Richards, who chastised the ruling party for not setting funds aside years ago, when the financing woes started.
“I don’t see particular logic in it,” said Mr Dickinson.
“I have a hard time thinking that I could sell the notion to the Bermuda population that I would cut things that are important, like funding for education, for works and engineering or police, in order to, in effect, bail out the Morgan’s Point development.
“What we decided instead is to accept the responsibility that came with the guarantees, and to put in place an appropriate financing strategy that ring-fenced the obligations of the Government,” said the Minister.
But he said the final tally on the total amount of money owed to local contractors remains unknown. How much of the $200 loan will be required, he said was an “educated guess”.