$.3b HYATT HITCH
Howai doesn’t like proposed settlement for hotel profits
Asha Javeed firstname.lastname@example.org
Finance and Economy Minister Larry Howai says financial settlement arrangements being proposed to settle a three-year-long arbitration between international hotel chain Hyatt Corporation and the Urban Development Corporation of Trinidad and Tobago (UDeCOTT), which would yield $300 million to the State enterprise, are not acceptable to Government.
Howai told the Sunday Express that UDeCOTT’s proposal, which seeks a Government guarantee, could burden the Exchequer with additional debt.
UDeCOTT contends that if the arbitration is settled, Hyatt will release the $300 million which it owes the State company in owner remittances.
Three years ago Hyatt Corporation, the manager of the Government-owned hotel on the Port of Spain Waterfront, initiated arbitration proceedings against UDeCOTT at the International Court of Arbitration for “multiple breaches” of its Hotel Management Agreement, which it signed in July 27, 2005.
Hyatt claimed that UDeCOTT’s transfer of its ownership interest and site (the property is leased from the Port Authority) to a subsidiary, the Port of Spain Waterfront Development Company Ltd (POSWDL) left it in doubt as to who was the rightful owner of some US$20 million in profits. Hyatt claimed it has been forced to place the funds in a separate account, pending resolution of this.
The profits accrued now stand at US$50 million).
In court documents, the hotel also claimed that its ability to provide management services was “severely compromised”, as UDeCOTT has refused to approve plans for the completion of the hotel and related services such as the construction of an additional food and beverage outlet and retail space, the upgrade of infrastructure as well as the management of the parking garage next to the hotel.
UDeCOTT’s counter claim was that Hyatt failed to pay distributions owed between 2008 and 2011 and the company’s claim that it is unsure as to whom the funds are entitled was “misconceived”.
The arbitration was suspended last year for three parties—Hyatt, UDeCOTT and the government—to work out a suitable multi-party agreement (MPA).
UDeCOTT and Hyatt agreed to certain terms- that the Government would provide a guarantee over the facility and that it would write to Hyatt stating that UDeCOTT was the rightful owner of the hotel.
UDeCOTT’s chief executive Kurt Ramlal, in a statement to the Sunday Express on Friday said:
“Hyatt and UDeCOTT entered into arbitration proceedings as a result of Hyatt’s refusal to pay monies due to UDeCOTT from the operation of the hotel since 2008. At this time the arbitration proceedings are in abeyance while the parties attempt to settle the matter.
The settlement involves the grant of a guarantee by the Government of Trinidad and Tobago to the Lenders in the Waterfront Project. The Guarantee has been approved for execution and now awaits the attention of the Minister of Finance.”
UDeCOTT chairman Jearlean John directed Sunday Express queries to director Shankar Bidaisee, who is also chairman of the company’s Hyatt Committee.
He said: “UDeCOTT prepared a brief outlining the draft MPA arrived at UDeCOTT and Hyatt, a draft letter to be signed by the minister along with other documents (including a legal opinion from attorney Akbar Ali) for his consideration. The ball is in his court.”
He noted that Hyatt was a profitable hotel and the increased revenues from Carnival would remain with the company until the matter is resolved.
In response to questions by the Sunday Express on Government’s delay in seeking a resolution to the impasse Howai said, “The settlement arrangements being proposed are not acceptable to Government.”
Howai explained that the mortgage over the property was security for a loan from US-based bank Wells Fargo.
That, he said, is different from the guarantee, which UDeCOTT proposed.
“What is now being requested is a Government Guarantee. Some years ago UDeCOTT had transferred the property into a separate company which gave rise to the arbitration,” he said.
“The original arrangement was for the Government to provide a mortgage over the facilities not a guarantee and we would prefer to retain the original arrangement rather than burden the Exchequer with any additional debt.”
The Sunday Express understands that POSWDL was not the only subsidiary company set up by UDeCOTT to manage its hotel business. The company had also set up the International Waterfront Resources Ltd (IWRL) to staff the hotel.
Sources told the Sunday Express that Hyatt’s insistence on not recognising UDeCOTT as the rightful owner, despite the fact that UDeCOTT’s bar licence is vested in its chief operating officer Greer Quan, had compromised its ability to upgrade the hotel as needed.
Despite not recognising UDeCOTT as the rightful owner of the hotel, last month Hyatt wrote to the State company seeking approval to host its annual Carnival fete, LIME, on February 26 which is budgeted at $4 million.
The Sunday Express tried unsuccessfully to contact Hyatt’s vice president of corporate communications Farley Kern, as well as its directors of corporate communications in the United States Amy Patti and Katie Rackoff for comment.