Govt To Raise Debt Ceiling Due To Morgan’s Point

September 13, 2019 | 114 Comments

[Updated with PDF & Video] The Government will raise the debt ceiling to cover the liabilities triggered by the defaults in relation to the Morgan’s Point project, Minister of Finance Curtis Dickinson announced today.

The previous administration had provided a guarantee of up to $165 million for the Morgan’s Point project, which has stalled, and the developers have defaulted on the loans.

Minister Dickinson said, “While this Government did not enter into the deal that placed the people of Bermuda ‘on the hook’ for the debt consequent upon the failure of this development, we are responsible for resolving the negative and unfortunate outcomes from the deal negotiated by the former government.”

Minister of Finance Curtis Dickinson Bermuda Sept 13 2019

Speaking at a press conference, which was held this morning after being postponed twice yesterday, the Minister said, “On March 14, 2016, the Government of Bermuda under former Minister of Finance Bob Richards, provided irrevocable guarantee agreements to lenders providing certain credit facilities on behalf of Morgan’s Point Limited [“MPL”] for use in the construction of a new hotel and condominium project at Morgan’s Point.

“The guarantees provide that the Government would be required to fund the project at a maximum cost of US$165 million if the borrowers are unable to meet their obligations to the lenders.

“Despite the financial viability of this project having been in question for many years, the OBA Government guaranteed much of its lending even as this project continued to be beset with difficulties.

“Despite extensive efforts by myself and the Premier to support the developers, they have defaulted on the terms of the loan agreements with their lenders; in particular failing to make any interest payments on the Tranche C loan and their payments and additionally several Bermudian companies and workers have gone unpaid. We understand that a number of businesses have claims against the developers and the project now known as Caroline Bay has been jeopardized.

“While this government did not enter into the deal that placed the people of Bermuda “on the hook” for the debt consequent upon the failure of this development, we are responsible for resolving the negative and unfortunate outcomes from the deal negotiated by the former government. Our first priority is to protect the public purse and Bermuda’s global reputation.

“Next, we must ensure that once our professional advisors establish exactly what happened that our vulnerable local companies and workers are protected. In this regard, this Government will acquire the valid claims of Bermudian companies, many of whom have suffered financial difficulty, having in good faith provided goods and services on this project. Finally, we must bring this project to conclusion.

“To understand how we got to this place we must go back to the history surrounding this project.

“In March 2016 the principals of Morgan’s Point announced that they had secured the financing for the first phase of the development through the support of large institutional investors including Arch Reinsurance Ltd, Axis Capital and Validus Reinsurance Ltd.

“By November 2016 it had been announced that construction had commenced on the Caroline Bay Marina with a view to having it open and operational in time for the America’s Cup the following year. The Marina was opened in April 2017.

“As I said in my prior comments in the House of Assembly, what the people of Bermuda did not know was that even before the marina had opened, the Caroline Bay project was experiencing difficulty. This had to have been known to the OBA Cabinet and the developers who persisted in providing public updates on the project which were inaccurate.

“In fact, in January 2018, one of the developer’s told The Ritz-Carlton News Room: “Caroline Bay’s construction progress is well on its way, and not only is the first phase of the Ritz-Carlton Reserve Residences at The Cove projected to be delivered on time, but the development of the resort community has brought great prosperity to our island.”

“Contrary to this statement, one month later, in February of 2018, after the Progressive Labour Party had been in office for only 7 months, the developers asked to meet with the then Premier and Minister of Finance to advise that there were significant financing issues and that in all likelihood work would slow down and eventually cease without an injection of further capital.

“Since that time, this Government has worked with the developers and has attempted to support all reasonable efforts to secure financing. The Premier has made himself available to meet with several prospective financiers and on every occasion has supported the project and the efforts to secure much-needed financing to complete at least Phase One.

“To date, the developers have been unsuccessful in their attempts to secure funding to meet their financial obligations to the Tranche B and Tranche C lenders. As a result, both the Tranche B and C lenders have demanded repayment in full of their outstanding loans.

“In seeking to robustly defend the public purse, the Government has elected to exercise its option, by reason of the defaults, to acquire the interests of both the Tranche B and C loans. The Government has negotiated a Credit Facility with local banks for up to $200 million; the proceeds of which will be used, in the first instance, to pay the Tranche B and C lenders.

“These extraordinary circumstances and the liabilities triggered by these defaults have resulted in the government having no choice but to raise the debt ceiling in order to borrow monies to fund the payments to the Tranche B and C lenders as set out in the guarantees. In preparation for this action, the Ministry of Finance has been in discussion with global ratings agencies.

“The decision to increase the debt ceiling runs counter to the plan that I outlined in this government’s budget statement in February that we had no plans to incur any additional long-term borrowings in this fiscal year. While this turn of events was unplanned, our commitment to being prudent stewards of the public purse remains unchanged.

“Later this morning, I will table an amendment to the Government Loans Act 1978 to increase the debt ceiling by $250 million to $2.75 billion. This amendment only provides for the authority of the Government to borrow up to the newly established limit and it is important to note that incurrence of debt or long-term borrowing will only take place when absolutely necessary. This matter is one of those cases.”

Update 7.02pm: In response to queries asking if the guarantee is $165M, why is debt ceiling up $250M and how much exactly will the Government pay out on the Morgan’s Point debt, a Government spokesperson said, “Neither the new borrowing nor the revised debt ceiling amounts have been determined for any purpose other than to fulfill the Government’s obligations and exercise of its rights under the respective guarantees for the Caroline Bay project. Ideally, the Government would not draw any additional funds other than the amount needed to purchase the interests of the tranche B and C lenders.

“However, as the Minister of Finance presented in his press conference, we will seek advice from professional advisors to determine the extent there are other potential liabilities the Government may need to address. Without this advice, borrowing or establishing a debt ceiling without room for contingency would be irresponsible.”

Update: Government had an opportunity to help save Caroline Bay, the One Bermuda Alliance said.

OBA Leader Craig Cannonier said, “Several weeks ago, we met with the developers of Caroline Bay where they outlined a plan for new investment into the hotel. They also met with the Progressive Labour Party and the Premier.

“The developers had billionaires lined up to invest. Did this Government encourage that plan? If not, why not? Given what was at stake, we need to know what happened.

“Instead we are going to raise our debt ceiling by $250m although we have had no explanation of why it is $85m more than the amount owed under the guarantee. What is that $85m for – has this Government overspent?

“When we came into Government, Bermuda was on the edge a financial abyss and we had been left with an out of control debt. The OBA had a two-pronged strategy to cut the debt and stimulate the economy and we succeeded.

“Every Government around the world uses incentives to developers to ensure that jobs are created or jobs are not lost.

“That is what we did and I am quite sure that given the same opportunity and the same economic climate that the PLP, which has had two years to help Caroline Bay, would have done the same.”

Update: The Government Loans Amendment [No. 2] Act 2019 follows below [PDF here]

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  1. Dockyard Lackey says:

    And the hole gets deeper and deeper!

    • OBA are PATHETIC, and we are still on de hook for de Airport $30 Million a year for 30 years.

      • Wahoo says:

        Problem is that this was reliant foreign investor confidence and that confidence was lost when you voted in the present administration.

        • WHAT? says:

          The problem is you and the oba aka UBP always think you’re correct.

          Now go change the name because this guarantee of up to $165 million deal you signed was pure white washed from the start.

          • Question says:

            So what is the other $85m for? Shouldn’t be needed at all if they’re running a ‘balanced budget’ like they promised (albeit with no sinking fund contribution, which moves the goalposts).

          • Hey says:

            Why the increase by 250 if the guarantee is 165. Also how much of the 165 has actually been incurred? Am estimating it is well below the $165. This smells of smoke and mirrors. Why didn’t the PLP give us all the facts?

        • Naughton says:

          Utter nonsense. Government has no business guaranteeing private business… it’s called Crony Capitalism. Thanks for nothing Bob Richards and your airport is a disgraceful crony deal too.

          • Question says:

            Yesterday I was told several times that government grants to private businesses are done all over the world, have you all changed your mind since yesterday?

            • Naughton says:

              Never changed my tune, and in any case a grant and a guarantee are two different things…

              Talking biz however, one of the bigthings holding investment back in Bermuda, especially in the tourism tourism sectors, are high costs. This is especially true for consumers… Take a look at the Five Star packages that can get you to say Dubai or Florence or Bali or even Miami Beach on Expedia or a similar site and tell me why anybody would come here. As for the cruise sector, the three main lines have done a fantastic job making sure all the money stays on board and failing that, that they get a big cut of onshore revenue.

              Sadly it is going to get a lot worse before it gets better… This country has to set aside politics and reinvent itself. And I doubt the Cayman model is a sustainable long term solution – that’s a bubble waiting to burst.

            • Mike Hind says:

              You are misrepresenting the truth again. Why do that?

              • Moor says:

                He isn’t though. Musical artists are private businesses.

              • Question says:

                A musical act going on tour is a private business,

                • Mike Hind says:

                  So, so clever, aintcha.
                  Twisting the truth to make a point.

                  Are you seriously going to argue against art grants?

                  Or argue, as you seem to be doing, that grants don’t go to these “private businesses” ?(which they aren’t. I am not a business.)

                  Are you REALLY not aware that governments all over the world provide grants to artists?

                  Or did you mean “yesterday, I learned that…”?

          • Onion says:

            You’re going to be so mad when you find out what the PLP did at Cross Island.

          • Things a Gwan says:

            Hmmmmm…and your thoughts on the hospital? How is that different from the airport?!

        • Ha,ha,ha, the deal was made under OBA so they own it, so those who have money only do business with ubp/OBA?
          Well John did say that in so many words.
          Sounds like when de Senate and Tea Party made sure everything Obama did failed.
          And we STILL have de botched deal at de airport and pray that ac-CON make their $30 Million annual income or we will be on de hook again!!!!!!!
          For 30 F#$%ing YEARS.

        • And we are still on de hook for de airport!!!!!!!!!!!!!!!!!

          • Things a Gwan says:

            No wevon de hook for de billions de PLP overspent in their first 14 years in power. Let’s not forget $800 million thatwas unaccounted for!

          • Vortex says:

            Read Larry Burchall, then you’ll understand who is to blame.

            Try Ewart Brown and Paula Cox – their debt dwarfs anything since.

          • Question says:

            And we are still on de hook for de hospital.

          • Marcusbmco says:

            Airport, power plant, hospital. I guess Canada is nearing a “fait accompli”

            • wa says:

              Canada has charitably taken on your crushing debt, and in turn will own you.
              Unfortunately, they don’t want to own you, nor does anyone else want anything to do with the debt ridden hovel that is Bermuda.

      • Dennis says:

        It’s uneducated people like yourself that let this island continue to sink. Wake up!

        • You dont need education to figure out when someone pisses on ya head and tells you its raining, you need common sense.
          OBA pissed on our heads for 5 years thats why their @$$€$ got voted out 2-1.

          • Anbu says:

            So why do you keep bringing a bowl when you should be bringing an umbrella then OJ? Its pee dummy, not water.

          • Onion Fist says:

            The term “dumb vote” has your picture all over it.

      • Things a Gwan says:

        OJ you are Pathetic. Didn’t hear you complaining about the $800 million unaccounted for in the plps fir 14. Didn’t hear you complaining about the 1.4 Billion in debt the PLP put us in after taking over a government that previously left us with money in the bank didn’t hear you complaining about Port Royal T Street Bermuda Housing Corp, the cruise ship terminal TCD, Bermuda Emissions, DLME bldg or $1 million gift to your former leader Dr Brown.

        • Yup and SpoongeBob borrowed $800 Million and doubled de debt in 5 years, plus made botched deals namely Morgans Point and Accon Airport, and wait till we have to pay them if they dont make their $30 Million annually for 30 years.
          Bunch of DREAMERS.

        • Poor says:

          Ok so let’s complain about the money taken from schools to host boat race (and unless you can produce the unicorn 300 million profit STFU) and then the 900 million giveaway to Arcon plus performance guarantees if they don’t hit fictional targets plus the 165 million to Morgan’s Point

          That adds up to a cool 1 billion + on the OBA!

          Suck on that!

      • Things a Gwan says:

        24-13

    • Real Bda says:

      Taking responsibility and telling the truth is something the UBP/OBA seriously struggles with.

      They would rather change the name of their party before telling us the truth about it’s racial past.

  2. toadinthehole says:

    Couple of observations – it is not clear exactly how much Government is going to pay out and why increase the debt ceiling by $250m if we are talking about paying $165m for Morgan’s Point

    • Things a Gwan says:

      Complex wasn’t close to finished so why pay the whole $165. Surely some it it was paid by developers before they ran out of funding which should also chip away at the $165.

  3. Joe Bloggs says:

    “Later this morning, I will table an amendment to the Government Loans Act 1978 to increase the debt ceiling by $250 million to $2.75 billion”

    Leaving aside all the crap about what some political party did or did not tell the Bermuda public (and the PLP had better not look in the mirror), if the guarantee is limited to $165 million why is the debt ceiling being raised by $250million please Minister?

    And why has the Government negotiated a facility of $200 million with local banks?

  4. 2Bermudaz 2bermudaz says:

    This: Finally, we must bring this project to conclusion. begs the question: how?

    • Reality Cheque says:

      No, finishing the project begs the question: “WHY”?
      WHY would we want to finish this project? The investor confidence that was there during OBA is no longer here. Why finish it? The units haven’t sold, nor will they now.

      Shall we turn them into “affordable low-cost housing?”

  5. Politricks says:

    Should’ve never issued it.

    But at the same time it is concerning that no investor is interested despite the construction progress made to date. Even with a guarantee in place. Why is that?

    • Joe Bloggs says:

      Investor confidence in Bermuda is not great right now. Investor confidence in large projects is not as dire as with small projects, but still confidence in Bermuda is down and that is worrying.

  6. Ringmaster says:

    The Minister promised a balanced budget for 2019-2010. As this $165m was unexpected then why is the debt ceiling being increased by $250m? What is the other $85m for – to cover the shortfall in the 2019-2010 budget? If there was going to be a surplus, then only $165m would be needed, clearly there is further bad news to be announced.

  7. me says:

    oh oh here we go

  8. watching says:

    Thanks Dunkley and Bob! Thanks OBA!

    • Dennis says:

      Again – uneducated…..blaming others is not a solution. Work towards a solution. Everyone like to point fingers, but do nothing about moving anything forward.

      • So we only point fingers at PLP.
        You guys are just like Trump supporters, crucify Obama yet glorify Trump when he F@#$ up.
        Thats why they got voted out, when PLP F@#$ up they take de blame so man up and take ya $#!+.

        • Anbu says:

          Plp take the blame?! LMFAO christ u are thick. Their slogan word is “colonialism”. STFU.

    • Onion says:

      This was done before Dunkley was Premier. This one is on Richards.

    • Poor says:

      This is clearly on the shoulders of the OBA who through sheer arrogance took money from our schools to host a boat race and who reportedly made $300 million but cannot account for it and who not only gave away 900 million in airport revenues over 30 years but also put us in a guarantee arrangement with Aecon and with Morgan’s Point! What a crock of crap!

  9. You gets no points insulting previous govt. for your failure.

    • Stick to the Story says:

      Uhhh, but it is the OBA’s fault. They guaranteed the loan. That’s just the facts of it. The OBA put the taxpayer on the hook for this failed private venture and the creditors have come for their money. Now we all have to pay. It’s pretty cut and dried.

      • And we are still on de hook for de airport!!!!!!!!!!!!!!!!!

        • Potato juice says:

          You keep beating that drum, time to change. The hospital under the PLP was given to a Canadian company. And the current govt ran down the Canadians taking our airport then they give the solar panel project to a CANADIAN firm. Take your blinders off.

          • Ya, but they didnt sneak in de House at 5:00am in de morning and agree on a deal that was voted on by DREAMERS who didnt see de contract.
            LMAO

            • Anbu says:

              U just mad that protesters were too lazy to get there early enough to stop them. Shush ya mouf bie.

              • Well at least de pepper spray victims got a lil $omethin $omethin.

                • Question says:

                  They weren’t victims, by a long shot. They were paid for nothing.

                • Anbu says:

                  Ya of your money dumbass! Lmfao. Keep em coming OJ. We can do this all day. Again ill ask a simple question. Altho no answer will be forthcoming that doesnt include “get over it” or “25-11”. What have “your people” accomplished in the last 20 years OJ? 20 YEARS!! Cmon lets have it! You the biggest plp mouthpiece in here so tell us oh great one. What is in bermudas cards? How u all gonna lift us up again? Besides asking the opposition how to do it again of course. Lmao. Prob sitting at the other end of your keyboard thinking you one up everyone with your ignorance lmfao. Try again son.

            • Gustav says:

              O.j.
              You are a troll

            • potato juice says:

              You do know that Denile is a river yes.
              So care to answer the questions about the hospital and solar finger? That the PLP GAVE TO A CANADIAN FIRM..
              CRICKETS

  10. Now you want us to give you more muney…

    What else is new???????

  11. puma says:

    I pray for a cold winter…

    So that govt keeps their hands in their own pockets…

  12. puma says:

    The thing is…this govt. makes us pay for their spending habits …and the necessities are left undone…

    • So de Historically white party that caters to de wealthy spends wisely, but de Historically Black party that caters to de average working Bermdian is incompetent.
      I get it..

  13. Or forgot all properties and investments here and overseas.

  14. Stevie says:

    Remember…Port Royal Golf course..
    Berkley school…The court house…Heritage wharf? And many more plp things they stuffed up.
    Guess plp forgot that. Guess those in green smarting over OBA got Americas cup here. Wheres the money gone plp. Need answers.

  15. John E. Thorne says:

    Where is the 800 million unaccounted for under the previous PLP administration?
    The UBP, PLP and OBA have all financially smashed the tax payers of this country! I personally am sick of it and all of our politicians can go jump in the ocean and swim out to North Rock and stay there!

  16. Question says:

    If this government knew how to encourage investment and run an economy, the project would still be on track. It fell into problems once the PLP started screwing things up.

    • watching says:

      absolutely untrue.

      • so-n-so says:

        how so?

        while you might not think the plp are screwing things up, do you think the money makers and shakers have confidence in the PLP to invest in Bermuda??

      • Question says:

        It’s absolutely true. The PLP can’t get investment and can’t run an economy. They took over with everything improving, and still managed to screw it up, in less than two years.

    • Stick to the Story says:

      The project was in default since January 2017 not July 2017. So stop trying to blame the PLP for the OBA’s mess.

      These private investors couldn’t get other private investors to invest in the project from jump so they went to their friends in government to guarantee the loan. Now here we are as taxpayers stuck with the bill for their poor judgement.

      • Question says:

        If the PLP have known about this since January 2017 why have two budgets passed without any provision whatsoever for this? Dickenson acts like he just heard about this last week,

    • Toodle-oo says:

      Which is a variation of what I’ve said since the get go. The OBA did this under the assumption that they would get another term in and confidence in Bda would have continued to grow. Thus there would have been no need to call in the guarantee .

      • Spin Doctor
        HA HA HA HA HA HA HA

        • Toodle-oo says:

          On the contrary , ‘truth doctor’.

          Have you a rational explanation for confidence in all things Bermuda plummeting since the last election ?

          Let’s see you spin that .

          tic toc

        • Gustav says:

          O.j.
          What does the PLP pay you , for each of your stupid comments

      • mixitup says:

        ^^And this folks^^ is the exact Arrogance that got us in this mess..

        • Toodle-oo says:

          If you interpret that as arrogance you either don’t know what arrogance is or you’re intentionally looking for ways to have your feelings hurt .

  17. Retro says:

    Pretty embarrassing for the man behind the SAGE report. It would be nice to hear his version of events. Surely ,there could have been another solution. I guess will never know.

  18. me says:

    shouldn’t The Premier be the one to deliver this devastating news why is he always hiding behind the scenes

    • Answer says:

      Voters like you are the reason the oba lost. STFU

    • potato juice says:

      Need a cog in the wheel, just like when the finance minister has to deliver the budget. We will then finally find out how bad of a state Bermuda was in,before the morgans point thing.
      Going get some bunker sand, or bit coin thatll pay it off.

    • Real Deal says:

      you do know that the PM did it before because he was holding both positions right?

  19. Kim Smith says:

    I understand that the grease balls are washing up again on the South Shore beaches (Grape Bay). When is the government going to put some money into that problem… ie. how we manage sewage in Bermuda?

  20. Truth is killin' me... says:

    BORROW AND TAX THE PEOPLE! Is that all you got Curtis and the PLP!? Time for a change my brother and it ain’t lookin’ GREEN!!!

  21. Dready says:

    More PLP bull S…..

  22. Memberberries says:

    Okay I understand the castigation of the OBA on this, but…why aren’t we laying any of the blame at the feet of the developers who p*ssed away the initial financing. Where is Brian Dupuerrealt? The man got paid $20m by AIG last year. Shouldn’t he be taking some heat here and abroad for using a small island government to be financially irresponsible? Finally, have we exhausted all avenues to recoup what we can from the developers? Or was the guarantee completely unsecured?

  23. Mb says:

    Every Bermudian should be outraged at this … and sick and tired of self interest arrogant politicians
    It’s an OBA mess and they need to own it …
    It’s unnecessary messes like this and the City Hall debacle, and Port Royal, and the dockyard music studio disaster, that are the reason we have Canada building our Airport cos we can’t afford to – so don’t even go there
    It was obvious to most except our wonderful politicians that Morgan’s point was stupidity defined… the men who swapped their prime land in Paget for a concrete ugly eyesore are DUMB. Had Bermudians and politicians been more behind the Resort proposal for Coral Beach and south lands we would have a successful new brand name hotel product by now … alas we don’t … we just have… a concrete eyesore

  24. Mr Speaker says:

    How did this country become one of the richest to one of the most expensive? What happened to the funds then and how do we get back to what was once prosperous?

  25. mixitup says:

    I’ll be the bigger person and just say this… This is indeed a F**k’d up position to be in as a country… Are we going to collectively point fingers and bicker? or can we make this somehow work in our favor?

  26. Ya boy says:

    Its amazing how Government can find money from anywhere, but police & prison officers are getting shafted. PLP, you have lost my vote as well as many others.

    Labor party? For the people? Yeah right!!

  27. Free Thinker says:

    The Bob and Donkey gift that keeps giving. Wait until the airport is in full swing and fail to make A-Con their guaranteed margin, we will be paying out of our arssis. I foresee, $500 departure tax in the near future.

  28. Naughton says:

    One more observation: the project will get another developer, would not surprise me if it was Chinese money. What they are waiting for is the price to drop – basically to nothing so that their only cost is finishing the project. A lot of similarities here to Bahamar in Nassau including the property sitting half finished for a number of years.

    Here’s a thought: declare independence and recognize Taiwan in return for them paying off our national debt plus an infrastructure fund of a couple billion – which we allow them to run.

  29. Real Deal says:

    “To understand how we got to this place we must go back to the history surrounding this project.

    “ Very Wise. with out doing this you run the chance of over looking things that would hinder a solution.

  30. Dark Star says:

    the group of subcontractors owed monies amounts to about $5>$20 million. Why is the ceiling being stretched the whole bond value??? Appears the PLP are up to their old tricks again and the taxpayer will pay!

  31. Pangaea says:

    The Bermuda Housing Corporation was funded by the Government for millions of dollars to build two apartment standard Bermuda homes at 4 buildings per million to meet the requirements to accomadate “first time” Bermudian home owners including their respective tenants, these monies were lent by way of deeds of first mortgage on their land.
    Later, many of those mortgages were sold to local banking institutions under guarantee there by re parroting money back to the public purse.
    Also pre fabs were made available to support the needy rental requirements, subsequently many prefabs were sold to the tenants there by reimbursing the public purse .
    A commendable and a very worth while venture to say the least.
    The question, where did all that repatrioted money get reinvested ?

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