The $124 million advanced to the Government-owned company to settle a loan guarantee for the Four Seasons project did not go through all the right procedures.
That acknowledgment has come from Director of Finance and Economic Affairs Ian Carrington who said proper permission should have been sought via a parliamentary resolution.
Issuing Government’s response to the highly publicised and contentious sale of the failed project that resulted in the investment being written off – which was raised as a matter of concern in the Auditor General’s latest report – Carrington agreed that the advance given to Clearwater Bay Ltd, to settle a loan guarantee made in respect of the Four Seasons project, “was not properly appropriated”.
He said it had been given based on instructions sent down by the Ministry of Finance at the time to the Treasury.
In his report, Auditor General Leigh Trotman pointed out that the advance, made under the previous Democratic Labour Party administration, “was not from an appropriation as required by law”.
Carrington’s response pointed out that the Clearwater Bay Limited (Guarantee of Loan) Act, 2011 to provide for the Government guarantee related to a loan for the recommencement of the Four Seasons project was in fact passed and signed into law in March 2011.
However, he said, more was required of the Government at the time.
“In spite of the passing of this Bill, the advance should have been properly appropriated by a resolution in Parliament once the guarantee was called, as outlined by the Auditor General in his 2018 report,” Carrington said in his response which was laid in Parliament late Thursday.
Responding to a further concern from Trotman that there was uncertainty as to what securities were owned by the Government to cover the loan, Carrington identified those as the land and buildings on the site.
He added that having assessed the situation, the Ministry of Finance also agreed with the Auditor General that due to the deterioration of the sprawling properties located at Paradise Beach, it was doubtful whether the full value of the loan could be realised. As such, he said, an adjustment was made in the books of the Treasury for 2018-2019.
Earlier this week, the former Executive Chairman of Paradise Beach Limited, Professor Avinash Persaud, responding to the Auditor General’s questions about the reason for the write-off of the investment in the project, explained in a statement on his Facebook page that it became necessary after the Mia Mottley administration discovered the Government did not hold the title to the property. That title had been handed over to a company called Blue Development Ltd.
Carrington confirmed this in his response.
“The basis for the investment being entirely written off was that the title to the land had been transferred to a private entity and as the Government no longer owned the property there was technically no asset to be valued.
“This matter is now in court and the asset will remain on the Government books with a zero balance until a decision is made by the court. In the event that the decision is favourable, the value of the asset will be reinstated in Government books at the realizable value at that time,” the Director of Finance wrote.
Explaining how Government came not to hold the title for the property, Carrington said that in 2016, Clearwater Bay, by a deed of conveyance and acting under its power of sale as a mortgagee, sold the Four Seasons properties to Blue Development Ltd for US$59 million (BDS$118 million).
No money was handed over but the purchase price was secured to Clearwater Bay Ltd by a debenture in the amount of $58 million and a deed of charge by way of legal mortgage in the amount of $60 million.
“There was an additional agreement entered into at the same time between Clearwater Bay Ltd. and Blue Development Ltd, that for so long as Blue Development Ltd was in discussion with an investor, that Clearwater Bay Ltd would take no steps to enforce the securities.
“These deeds remain undated to this day and neither the deed of conveyance, the debenture nor the mortgage were ever filed in the Land Registry or Companies Registry in the case of the debenture. The effect of this is that Clearwater Bay Ltd is holding security documents that have not been ‘perfected’ and that cannot be enforced,” Carrington further explained.
The matter is now engaging the attention of the courts.
“Only after this course of litigation is settled and the securities held by Clearwater Bay Ltd. ‘perfected’, would Clearwater Bay Ltd. be able to enforce its security over the Four Seasons properties and recover the amount due, which is BDS$118 million,” the Director of Finance said.
He noted, however, that given the uncertainty of both the outcome of court proceedings and the timelines for the exhaustion of any legal challenges by Blue Development Ltd., it is difficult to estimate when a new sale of the properties can be accomplished.
“While this is taking place it is prudent to let the country know that there are credible investors who are keen to purchase and develop the property,” he said, confirming Persaud’s earlier disclosure about investor interest in the project.
“However, Government’s hands remain tied.” randybennett@barbadostoday.bb
