Decision imminent on Lucayan deal


Tribune Business Editor

The Grand Lucayan's chairman yesterday confirmed a preferred bidder for the resort is likely to be announced this week with the Board set to submit its recommendations imminently.

Michael Scott told Tribune Business that the Grand Lucayan Board was currently finalising its submission to the Government as he warned time is running out for the resort's managers and their representatives to accept what he branded as a "super generous" payout offer.

He argued that the Bahamas Hotel Managerial Association (BHMA) members and their president, Obie Ferguson, faced a choice of taking the collective $3.2m voluntary separation package (VSEP) currently available from the Government or walking away with much less after the Grand Lucayan is sold and they are terminated.

Confirming that the Grand Lucayan's Board met on Friday to discuss the assessment conducted on the best three to four purchase offers by Colliers, the Canadian-headquartered real estate firm, Mr Scott said he and his fellow directors were now completing their own report and conclusions for the Government.

"We're in the process of doing that right now, but otherwise my lips are sealed," he told Tribune Business, declining to comment further or identify the likely preferred bidder. Mr Scott and the Board had previously set end-March as the deadline for identifying a preferred bidder and submitting their proposal to the Government - a timeline that will be hit by the end of this week.

While no details have been forthcoming on the Colliers assessment or Board meeting’s outcome, multiple Tribune Business sources expect that the ITM/Royal Caribbean joint venture will likely be selected as the preferred bidder.

The Mexican port developer and cruise line are proposing to transform the Grand Lucayan, and the surrounding area, as well as Freeport Harbour into a destination product using water-based adventure theme parks. Both sides bring considerable expertise and development resources, with Royal Caribbean adding an extremely large customer base to the mix.

Tribune Business sources yesterday suggested that the Grand Lucayan's acquisition could result in Royal Caribbean electing to use Freeport as a "home port" for some of its cruise ships, with passengers flying in via Grand Bahama International Airport to "overnight" at the resort before setting off on their cruises.

Besides providing a major boost for the aviation industry and airlift into Freeport, this newspaper's contacts added that becoming a "home port" could also revive prospects for the liquefied natural gas (LNG) industry on Grand Bahama.

Cruise ships, especially the 90-100 currently in production, increasingly rely on LNG as a fuel - opening up the possibility for LNG bunkering services to be offered from Freeport. BISX-listed Arawak Port Development Company (APD) has made no secret of its interest to do similar in Nassau in partnership with New Fortress Energy as part of the $250m cruise port redevelopment, while Shell North America is looking at similar spin-off opportunities from the new New Providence power plant that it will construct by 2022.

Mr Scott, meanwhile, reiterated his and the Board's continued tough stance over the BHMA's payout demands for the 90 Grand Lucayan managers who wish to accept the VSEPs and leave if the terms are right.

While the Industrial Relations Act was amended under the former Christie administration to mandate that the terms of an expired industrial agreement remain in effect until a new one is agreed, the Grand Lucayan Board's position is this does not apply to its deal with the BHMA as it ended before the law was changed.

As a result, the Board and government are arguing that the terms and conditions of the BHMA's last industrial agreement no longer remain in effect, giving them the ability to deal with each managerial staff member on an individual basis rather than as a collective trade union.

"We have non-suited the management union at the Tribunal," Mr Scott told Tribune Business. "They had brought Industrial Tribunal proceedings against us.

"We were advised by our attorneys, ParrisWhittaker, and made a submission that there was no legitimate industrial agreement even though there was an amendment to the Industrial Relations Act that even if a union agreement expired it was deemed to continue in effect until a new one was agreed.

"There is no valid industrial agreement, so we're able to deal with the union members on their own. They can either deal with the generous offer that was endorsed by the minister [of tourism and aviation] as recently as last week; they can either accept that or wait for the sale of the hotel and everyone to be terminated," he continued.

"They will get much less on termination than they will get from the current proposal that we made with the approval of Cabinet and the minister of tourism. They can either accept it now or end up with much less when the hotel is sold.

"They can either take what we're offering them now, a super generous offer, or wait for the sale and termination of their employment. I'm done. That's it."

Negotiations between the BHMA, and Lucayan Renewal Holdings/the Government, have become contentious on several occasions with the latter arguing that there is simply no more money available for VSEPs due to its desire to minimise taxpayer exposure to a loss-making property it is aiming to sell back into private sector hands as rapidly as possible.

Backing Mr Scott, Dionisio D’Aguilar, minister of tourism and aviation, told Tribune Business on March 14 that the Government was not increasing the total value of its payout offer beyond $3.1-$3.2m. The BHMA is demanding $5.5m, a figure that includes the retirement annuity, leaving them some $2.4m apart.

The Government, initially basing its VSEP offer on the Employment Act, which caps payouts at 12 years of service, had proposed $2.64m - the sum likely available to the managers should no agreement with the BHMA be reached before the Grand Lucayan is sold. Mr Scott had subsequently increased the offer by around $500,000 to the present sum.

Mr D'Aguilar, minister of tourism and aviation, striking a markedly more conciliatory tone, yesterday said he was "minded to accommodate" the BHMA's request for another meeting this week but warned that "compromise" was essential to achieving resolution.

"He [Mr Ferguson] has requested another meeting, and I'm minded to accommodate them," he told Tribune Business. "We'll meet later this week. Cabinet is on Tuesday, parliament on Wednesday, so probably Thursday. It's a process. We're negotiating.

"He wants 'x', we don't quite have 'x', so we're trying to find a middle ground everyone can live with. We will meet again. It will be cordial, very conciliatory, but I guess that at the end of the day negotiations require compromise. Who will be prepared to compromise what will determine whether we have a deal. The negotiations continue.

"I've found in my business life that if you hold out for the best, best deal inevitably you don't get it, but it takes time to determine that. A bird in the hand is worth two in the bush. It's better to get not quite what you want rather than wait months and months to find out you're not getting everything you ask for. You end up compromising," Mr D'Aguilar said.

"If I was an employee, delaying and delaying months just to get an extra 10 percent, is that worth it? Or settle and move on. We're going to discuss what they want to discuss, but at some stage a decision has to be made on a solution."

The Government and Grand Lucayan Board have argued that the union’s comparisons with previous VSEPs are inappropriate because those involved operating businesses in the process of being sold or restructured, while the Grand Lucayan has yet to be disposed of.

The union’s total $5.5m payout figure also includes the workers’ retirement annuity, but the Grand Lucayan Board’s position is that it needs to take this issue up with Hutchison Whampoa - not the Government.

Some observers will likely argue that the Government should have left the staff payouts to the Hong Kong conglomerate rather than take responsibility itself, as this could have avoided the present impasse.