CoH Seeking To Borrow To Pay Off Missing $18M
Junior Minister of Home Affairs Minister Sylvan Richards introduced a Bill today [Dec 16] in the House of Assembly, seeking to amend the Municipalities Act 1923 to permit the Corporation of Hamilton [CoH] to increase its borrowing limit in their effort to secure financing to pay off the $18 million debt to Mexico Infrastructure Finance [MIF].
$18 Million Loan Not Paid Back
Last year, MIF extended an $18 million loan to Par-la-Ville Hotel and Residences Ltd [PLV], with the CoH signing on as the guarantor.
PLV was supposed to develop a hotel on the Par-La-Ville car park, and the $18 million was a bridging loan which was supposed to be used to secure financing for the hotel development.
The loan was supposed to be be repaid in December 2014, however it was not paid back resulting in MIF initiating legal action against both the CoH and PLV principal Michael MacLean in early 2015.
Since this occurred, the Corporation has been through an election process and is now being run by a new administration.
The whereabouts of the missing $18 million remains unclear, and the police — following a criminal complaint made by the Minister of Home Affairs — have been carrying out enquiries since April of this year.
Bill Introduced
Speaking in the House today, Mr Richards said, “This Bill seeks to amend the Municipalities Act 1923 [“the Act”] to permit the Corporation of Hamilton to increase its borrowing limit primarily in their effort to secure financing to pay off the $18mil debt to the Mexico Infrastructure Finance LLC as a result of the Supreme Court Order issued in May of this year – as well as to assist with its on-going operations.
“Members may recall that the Par-la-Ville Hotel & Residences, Ltd. [“PHRL”] entered into a Credit Agreement with Mexico Infrastructure Finance, LLC [“MIF”] whereby it borrowed the sum of US$18 million.
“The purpose of the loan was to provide funds for the payment of expenses associated with a permanent loan which was to be negotiated for the funding of the future hotel development. The loan was to be repaid on December 30th, 2014.
“At that time, the Corporation entered into a guarantee of the loan and, as security for that guarantee, it provided MIF with a first mortgage over the land comprising the Par-la-Ville parking lot. The PHRL executed a Deed of Surrender of the lease that it had over the Par-la-Ville parking lot.
“This Deed of Surrender was to be held in escrow and would be triggered into effect in circumstances where PHRL defaulted on the loan. The loan was subsequently called and the borrower [PHRL] was then in default thus the Corporation is now liable for the debt of $18M and interest following the courts’ ruling of 7% per annum or approximately $3,500 per day.
“The matter was subsequently adjudicated on within the Supreme Court with the Supreme Court Order [2015:No.22] dated May 27th 2015, now requiring the Corporation to honour its debt to MIF.
“Notwithstanding Mr. Speaker, the Corporation was not in a position to pay this debt and as a result in the delay of receiving the $18mil months after this Supreme Court Ruling, MIF instructed their legal counsel to file a Writ of Fieri Facias to the Supreme Court which commanded that goods, chattels, lands, houses and other property of the Corporation authorized by law be seized in execution made to the sum of $18mil together with all other legal or incidental expenses. The aforementioned assets were to be sold by public auction to satisfy all sums due under this Writ of Execution.
Threats To Garnish Corporation’s Assets
“The new group of Corporation Councilors, in an effort to rectify the inherited issue, reached out to the Minister responsible for Municipalities to request support for the Government of Bermuda to provide some assistance in an effort to mitigate any reputational risk to the Corporation should the MIF group proceed with their threats to garnish the Corporation’s assets.
“In essence, this would equate to the selling of Corporation real estate, to the garnishing of parking revenues by the MIF Group to ensure their debt was paid. The knock on effect of this action would have resulted in the operation of the Corporation coming to a grinding halt, with over 100 staff being made to go home as the Corporation would have not been able to pay salaries or utilities as examples.
Enquiry Into The Missing Funds
Mr Richards continued, “Following a criminal complaint made by the Minister of Home Affairs to the Bermuda Police Service, the Bermuda Police Service has been carrying out its own enquiries since April of this year – with those enquiries actively on-going.
“Notwithstanding the above, the Minister and Mayor have been diligently working to secure three professionals to undertake an enquiry into the missing funds – which is to include a senior lawyer, a senior accountant and someone with a strong public policy background. The latter two have been secured. Their remit is to be independent and look at the roles of the Council [as it was then], Corporation staff and any others as to how decisions were made in respect of the way money was transferred.
“By way of reminder a substantial sum of the bridging loan was at some point paid to a company registered in Gibraltar called Argyle Limited as a fee to get access to a large line of credit to develop the financing for the hotel and residences development. Other monies were paid to various other parties – none of which was notified to the Government. At that point there was no obligation to do so.
“The liquidators of PHRL as appointed by the Corporation also have the necessary resources and powers to carry out their own enquiry into the missing funds. Their work is ongoing.
Increase Borrowing Limit
Mr Richards said, “To that end, it is therefore proposed to amend the Act to increase the twenty million dollar borrowing limit for the Corporation of Hamilton to thirty million dollars as the Corporation believes this increased limit, although not close to the fifty million they requested in 2010, will permit them to borrow the funds to pay off MIF, continue with its on-going operations to mitigate major staffing losses, to investing in their aged infrastructure. The ability of the Corporation to satisfy the court order is dependent of the $20m limit being raised.”
Mr Richards full remarks follow below:
Mr. Speaker and Honourable Members of this House, I introduce the Bill entitled “Municipalities Amendment [No.3] Bill 2015”.
This Bill seeks to amend the Municipalities Act 1923 [“the Act”] to permit the Corporation of Hamilton to increase its borrowing limit primarily in their effort to secure financing to pay off the Eighteen Million Dollar [$18mil] debt to the Mexico Infrastructure Finance LLC as a result of the Supreme Court Order issued in May of this year – as well as to assist with its on-going operations.
Mr. Speaker, Honourable Members may recall that the Par-la-Ville Hotel & Residences, Ltd. [“PHRL”] entered into a Credit Agreement with Mexico Infrastructure Finance, LLC [“MIF”] whereby it borrowed the sum of US$18 million.
The purpose of the loan was to provide funds for the payment of expenses associated with a permanent loan which was to be negotiated for the funding of the future hotel development. The loan was to be repaid on December 30th, 2014.
Mr. Speaker, at that time, the Corporation entered into a guarantee of the loan and, as security for that guarantee, it provided MIF with a first mortgage over the land comprising the Par-la-Ville parking lot. The PHRL executed a Deed of Surrender of the lease that it had over the Par-la-Ville parking lot.
This Deed of Surrender was to be held in escrow and would be triggered into effect in circumstances where PHRL defaulted on the loan. The loan was subsequently called and the borrower [PHRL] was then in default thus the Corporation is now liable for the debt of $18M and interest following the courts’ ruling of 7% per annum or approximately $3,500 per day.
The matter was subsequently adjudicated on within the Supreme Court with the Supreme Court Order [2015:No.22] dated May 27th 2015, now requiring the Corporation to honour its debt to MIF.
Notwithstanding Mr. Speaker, the Corporation was not in a position to pay this debt and as a result in the delay of receiving the $18mil months after this Supreme Court Ruling, MIF instructed their legal counsel to file a Writ of Fieri Facias to the Supreme Court which commanded that goods, chattels, lands, houses and other property of the Corporation authorized by law be seized in execution made to the sum of $18mil together with all other legal or incidental expenses. The aforementioned assets were to be sold by public auction to satisfy all sums due under this Writ of Execution.
Mr. Speaker, the new group of Corporation Councilors, in an effort to rectify the inherited issue, reached out to the Minister responsible for Municipalities to request support for the Government of Bermuda to provide some assistance in an effort to mitigate any reputational risk to the Corporation should the MIF group proceed with their threats to garnish the Corporation’s assets.
In essence, this would equate to the selling of Corporation real estate, to the garnishing of parking revenues by the MIF Group to ensure their debt was paid. The knock on effect of this action would have resulted in the operation of the Corporation coming to a grinding halt, with over 100 staff being made to go home as the Corporation would have not been able to pay salaries or utilities as examples.
Against that imminent challenge, the Minister undertook to have regular meetings with the Mayor and his technical officers to ensure the Corporation remained open. This included meetings with MIFs legal counsel, as well as the Corporations legal counsel to find solutions acceptable to all parties which included providing assurances that MIF would receive the $18mil even if the Government had to provide some form of guarantee.
As relating to the banks, the Ministry also provided assurances that the necessary legislation would progress as relating to revenue generated from parking offences within the City limits going to the Corporation that would permit the Corporation to service their monthly payments in respect of any such loan, to increasing the borrowing limit of the Corporation – hence the Bill before this Honourable House today.
Mr. Speaker, the Government has not taken lightly agreeing to provide some form of guarantee to the Corporation in this regard. Certain caveats are required of the Corporation before Government provide any guarantee. These caveats included:
- 1. Confirmation that the Corporation of Hamilton shall be responsible to reimburse the Government for all costs associated with drafting any documents relating to any financial arrangements agreed;
- 2. The Corporation shall bear responsibility for having all assets [buildings/parking lots/docks] valued at current market rates which would provide Government the option of selecting those properties to serve as collateral to cover the $18mil guarantee should the Corporation default on any loan agreements;
- 3. An enquiry into the movement of the $18mil from the escrow account to be conducted.
- 4. Confirmation that the Government would be looking at .25 or .5 of 1% basis points interest on any guarantee agreed; and,
- 5. That the Ministry of Home Affairs would continue to work with the Attorney-General Chambers on the necessary legislation – from those associated with revenue to the raising of the borrowing limit as previously mentioned.
Mr Speaker, in addition, following a criminal complaint made by the Minister of Home Affairs to the Bermuda Police Service, the Bermuda Police Service has been carrying out its own enquiries since April of this year – with those enquiries actively on-going.
Notwithstanding the above, the Minister and Mayor have been diligently working to secure three professionals to undertake an enquiry into the missing funds – which is to include a senior lawyer, a senior accountant and someone with a strong public policy background. The latter two have been secured. Their remit is to be independent and look at the roles of the Council [as it was then], Corporation staff and any others as to how decisions were made in respect of the way money was transferred.
By way of reminder a substantial sum of the bridging loan was at some point paid to a company registered in Gibraltar called Argyle Limited as a fee to get access to a large line of credit to develop the financing for the hotel and residences development. Other monies were paid to various other parties – none of which was notified to the Government. At that point there was no obligation to do so.
It is worth noting that when the various transactions were undertaken that is the cause of the debacle in which the Corporation has found itself, the Corporation was not under Government stewardship. This independent enquiry will help to identify failings in the way the Corporation conducts its affairs as well as give information to the existing Council on what transpired. It will be for the Mayor to then make decisions in consultation with the Ministry as to next steps.
The liquidators of PHRL as appointed by the Corporation also have the necessary resources and powers to carry out their own enquiry into the missing funds. Their work is ongoing.
Mr. Speaker, section 37 of the Act, Limit on Powers of Corporations to Borrow Money, provides that the Corporations of Hamilton and St. George’s respectively shall not borrow, receive or hold upon loan any sums exclusive of any sums which the Legislature has authorized or shall authorize either of such Corporations to borrow or guarantee for specific purposes, in the whole exceeding at one time. In the case of the Corporation of Hamilton the maximum sum is twenty million dollars [$20,000,000.00] – and in the case of Corporation of St. George’s, the maximum sum is one million dollars [$1,000,000.00].
Notwithstanding, Mr. Speaker, the Corporation of Hamilton over the years has matured as a business and as such has acquired many assets such as buildings to additional car parks. The Corporation also has to contend with the ever increasing operating costs to maintain existing and new infrastructure as well as pay their day to day expenses such as utilities and salaries.
It should be important to note Mr. Speaker, that the Corporation of Hamilton, as far back as 2010, requested of the then Government to increase its borrowing limit from twenty million to fifty million dollars.
At that time the Secretary of the Corporation stated, and I quote, “$20 million dollars is not sufficient in today’s market to adequately cover the cost of projected capital projects, nor does the amount reflect the current healthy financial statements of the Corporation regarding assets and liabilities.”
Mr. Speaker, as I mentioned earlier in my brief, the Minister has been working extremely hard to find a solution to this situation that has far reaching implications if not sorted soon. This has included meeting with the attorneys for all parties including MIF and regular meetings with the Mayor and Council.
To that end, it is therefore proposed to amend the Act to increase the twenty million dollar borrowing limit for the Corporation of Hamilton to thirty million dollars as the Corporation believes this increased limit, although not close to the fifty million they requested in 2010, will permit them to borrow the funds to pay off MIF, continue with its on-going operations to mitigate major staffing losses, to investing in their aged infrastructure. The ability of the Corporation to satisfy the court order is dependent of the $20m limit being raised.
Mr. Speaker, this Government is doing its utmost to allow the Corporation to manage its own affairs and this bill will allow the Corporation to remain sustainable with minimal Government interference. The new Council came in to office with an unenviable task and their work to date to ensure the Corporation remains sustainable has been very good indeed.
The Minister with responsibility for Municipalities and his Permanent Secretary have done everything they can to work with the new Council and will continue to work to ensure that funds are recovered.
Thank you Mr. Speaker; I now invite Honourable Colleagues to participate.
Government bailing out CoH by increasing all yah land taxes including mine. Cut the civil service now or I’m voting yah a&&es out next time around. I ain’t had a pay rise in seven years!
By voting this government, you would be voting in the PLP, who under their tenure increased the civil service to what it is today. Now thats makes great sense doesn’t it.
Let’s not forget that it was under the PLP tenure that they also orchestrated the administration in the CoH that helped create this mess.
Yes. ANOTHER PLP fail, just somewhat disguised.
how about effective January 1 2016 the land tax payers put this government on notice that there will be no payments until acceptable reforms have been made in that wasteful overbloated Civil Servants machinery?
i personally intend to put the tax amout due in a special bank account to demonstrate good faith until such time meaningful changes have been made by this government.
Cut the civil service and prepare for the union to get involved. Complain to your previous govt fir this mess
Sorry…but ya credit history rating jus ain’t cutting it.
CoH …Credit on Hold!
Also…I would have helped out but …land tax jus went up.
It’s ok though…the banks will bail them out …With our money to obtain more controlling interests…will bermuda weather the storm between now and 2017
How much is 18 million divided by 100+ staff members?
That would have surely been a more beneficial investment than ‘flushing it down the drain’.
I wonder what ‘team’ will be held accountable for this major blunder and expense, inconvenience and embarrassment…
Not to mention the Black Mayors Conference fiasco…
Incredible, 18 Million gone. Failed Black Mayors conference in an obvious scam everyone and their brother saw coming. Again, all the perpetrators are walking the streets free. Laughing, as the tax payers suck it up and pay up. Just like the last administration. Country billions in the hole, Auditors screaming foul play…while the perpetrators walk free and tax payers pay. They bring in experts to say raise taxes etc. Before you raise my taxes I want to see perpetrators in jail for robbing the country blind. Politicians, civil servants, contractors the lot of them locked them the h e double hockey sticks up before you raise my taxes or introduce a new parking regime CoH. Considering the bail out parking should be free in Hamilton bunch of sorry SOB.
The PLP “DreamerTeam” should pay for it. They’ve been keeping a low profile since their evident stupidity came out haven’t they. Has Donal moved away?
Dream Team…how about the “Scheme Team”?
Approve the loan and raise parking fees and the cost of parking tickets. Y’all will pay.
Quo Fata Ferunt
Better round up that last Mayor & his bunch of dreamers who were in way over their heads.
Better round up the people who put them in power too. They are the ones truly resposible for this $18M fiasco. Too bad they can’t be held accountable for a penny of it.
And consider criminal charges, investigate negligence on part of the advisers and trace and seize the funds. All very stinky. It will bankrupt CoH.
It is fine to bail out COH, but when asked to do the same for Sandys 360 you came up with every other excuse. Why the double play?
Oh yeah. The government should bail out every privately owned sports club. Particularly the ones where $800,000 of government funds already went missing. And you would bleat the loudest when your taxes go up to pay for it.
The question re: Sandys 360′s why the double PAY?? How did they get that duplicate payment and when will taxpayers get it back? Is the person who approved the duplicate payment still employed in the civil service?
They are facilitating the car park returning to Bermudian ownership from an overseas business.
What overseas business took Sandys 360?
Govt are allowing the COH to borrow money from a bank to facilitate this, so they are not bailing out anything. The COH are on the hook.
Sandys 360 was a disaster. Double paid 800K + with the double payment apparently not returned.
If viable, then private entities would step up to run 360. Yet none have found it feasible.
Can we afford to bankroll that car park?
The Government isn’t bailing out the CoH.
They simply amended the CoH legislation to facilitate this borrowing. The Government isn’t borrowing the funds nor are they giving the CoH the $18mn.
There is a big difference between this scenario and expecting the Government to fork out $10mn+ for Sandys 360 which was a poorly thought out project from its inception. What budget do you think the $10mn+ should be taken from to pay off the 360 debt?
Who in their right mind would lend $10mn to a public school Board of Trustees in the first place?
Learn how to read and comprehend what is being said instead of going off on inaccurate tangents each and every post.
Ok, lets not call amending the Municipalities Act so the COH can borrow way above their means a bail out. But more of a measure to shifting ownership of the Par-la-Ville property from one foreign entity to another foreign entity. A foreign entity by the way our government did bailed out due to their greed in the markets that went south. So now that foreign entity owes government by extending loan facilities at really good interest rates. You wash my hands, I’ll wash your scenario with tax payers money to a private corporation.
Ok, lets say again that government is not bailing out CoH by changing the Traffic Act to allow CoH to clap and ticket at their discretion within city limits. I am sure the CoH will allow you to go over by five minutes before they clap your car for a nice little chuck of change. They will take it off for 10 times more than what you would have paid for an extra hour of parking. Police those street CoH, you will pay off that 18 million in no time.
So let me get this straight that it is not a “bail out” technical but at the end of the day we the tax payers are going to pay for the CoH debt by using the city. I bet the CoH will charge for bike parking next. The government changing the law so a corporation can police the street for parking offences and charge people those fees at their discretion. Wonderful!
So our government has no problem facilitating solutions to poorly run corporations who cannot show restrain or due diligence. The Par-la Ville property is not worth 18 million let MIF have at the CoH because I see no difference in foreign ownership of the property. Let them garnish and seize other CoH property to satisfy the debt. Let the CoH claim bankruptcy, big brother will step in and run the show. After all the land isn’t going anywhere.
Government will still collects taxes from the new owners and the new owner or whom ever they sell it to might improve things by investing in Bermuda. It is a win win for the tax payer to let the CoH fail, government run the city and have new investors in Bermuda property market. OR Let the Corporation of St. George run both municipalities they seem to be doing an ok job at it.
Going to assume the ‘foreign’ entity that you claim the government bailed out is BNTB.
Well for one thing you are incorrect to assume that BNTB is the lender of choice in this matter.
Secondly BNTB was not bailed out by the Government. To recapitalise the bank they issued $200mn in preference shares. The Government issued a guarantee of these shares in the event that the back failed to honour ther financial commitments to the shareholders.
At no time did the BDA Govt give any money to the bank as the US govt did in 2008/9. This guarantee will never be called upon as the bank is back on stable footing and profitable once again. On top of that the govt makes $2mn a year from the guarantee via a 1% annual fee that was part of the agreement.
The only actual real bailout in recent times by any BDA govt was the forgiven BIU debt of $10mn related to the Berkeley performance bond.
There you go Rodney. You are a get it done type of person. This is a project for you. Over $1.6M dumped into it & gone down the hole somewhere. Why not you take a stab at it?
Yes I can do it, with no money down. I would sign up membership of all school children in Bermuda and every other person in Bermuda. Over a period of time, this facility would be able to carry itself. Some up front money from government would allow me to buy Sandys 360 at a discount. Deal done.
No need…just make sure people pay their parking tickets and parking revenues will go up. No need to charge us more to park!
Fix the parking ticket backlog. Make it so that you cannot license your vehicle until you pay your parking tickets.
Simple solution, but it seems tough for some people to implement cost effective solutions!
Smiths
Agree totally with NOT allowing car to be licensed if you have parking tickets!!! Come on, Land Tax is being raised, because we are short ,$19 million, what about the $220 million we are short in overdue taxes, when are they going to go after the people that are vacationing but not paying!!!!! It’s time for the mane and shame game, you will never get all the funds owed, but I bet you could get a fair bit, if anyone tried!!!
Agree with this….No TCD licence until Parking tickets paid. If TCD licence is over two months overdue, then your vehicle is found and impounded at a cost of $1000.00 to release.
Mr. Hmmm
FACT ::: The cost of living is out of balance.
FACT ::: There is more money leaving this island than is coming in.
FACT ::: We pay more money every year to the T.C.D. than any other country in the world.
FACT :::The working class are still finding it heard to make ends meet.
FACT ::: We are living in a two tear economy.
FACT::: There is a need for this country to re think its future .
For many of us the hope of a better life is a far off dream , lowering the economic boom on the people creates misery and despair.
Why would we want to create more hardship than we already have?
May be we could come up with ways that we as a NATION can improve our STATION.
FROM LIFE’S GREAT LESSONS.
Sitting on the wall ” Humpty Dumpty had a great fall.”
“10 green bottles sitting on the wall. “
FACT: We paid $5 + for a facility to test vehicle emissions, the whole operation was privatised (then given to a friend to run) and by law you have to pay for some guy to stick a tube in your muffler to test for something that is NEVER actually failed.
That should be $5 million.
Abosolutely I agree 100%. How hard it is for Government to collect funds owed for unpaid tickets that people just toss in the garbage as they know nothing is going to happen. They should also revoke their travel priviledges and impound their car until paid up.
Thing is, the paper tickets issued by wardens are not logged electronically. When you go to pay your fine, they have no record of it, just your honesty and the ticket you pass over the counter. The traffic wardens have no idea if a fine has been paid or not.
A former Permanent Secretary was well aware of this and saved a few $$$ in parking over the years.
why is GOV want to pay off M&M loan? sounds fishy…real fishy
Boy, 18 million dollars disappears and nobody is held accountable?
Incredible.
““The new group of Corporation Councilors, in an effort to rectify the inherited issue, reached out to the Minister responsible for Municipalities to request support”
This is the same Minister that allowed the parking lot to be used as collateral and assured the public that proper procedures were in place to prevent the loss of the parking lot. He has not been held accountable for his part in this debacle! Where is the transparency?
Beter go back & check the timeline of who did what & when. Find a picture of the former COH & you will see who is responsible for this mess.
Funny. The PLP orchestrated this fiasco, installed a puppet surrogate (something they villify everyone else for) and then try and blame the OBA.
Let me guess, CoH taxes are going up?
Don’t say “who cares” people. That means business is more expensive.
You know what that means to profit? So you know what that means to prices…
Think about it, All those missing $$$$$$$ gone, when John Doe, Sara Doe, Doe Doe
and all the others Does where/are in charge of the MISSING PURSE.
What I can say is the majority of comments prove our education system is failing big time. The reading and comprehension skills being displayed are scary. Very few comments are actually based on the article.
The Government is raising the Corporation debt ceiling not paying off the debt. The corporation still has to pay the debt service by finding income preferably not previously tapped.
For those you are not in the know – the corporation originally issued the tickets and then moved the wardens and the income to the Government a few decades ago. The Government is now providing BOTH municipalities with the income received from parking tickets issued in their domain. The Government is proving a guarantee for the loan but it is also not free. The Corporation is expected to put up collateral, pay loan fee and fund all costs incurred by Government. If you think that is free then what do you call the WEDCO guarantee ( unconditional no fee no cost).
The Corporation is the city and so goes the island. Anyone of the commenters thinks the island will not suffer if the city is forced to shut its operations is clearly from a different realm than I.
Helpful comments, suggestions or directions sure but *sinine “axpert”comments are a waste of time and space.
So, You don’t think that the government could assist Sandys 360 with re financing, while at the same time incorporating them into the school system so that all the schools in Bermuda could use this facility ? What fee would you charge each student? Any way, this is a way to pay this facility off. Deal done.
WE NEED SOLUTIONS TO MANY OF OUR PROBLEMS, BUT MOST OF US LOVE THE FIGHT. WE DON’T WANT SOLUTIONS.
WE THE PEOPLE !
Are not satisfied with the way the public purse is managed.