Oct 4, 2013
A great deal of deliberately misleading information and ill-informed opinions have been published in the media, including in articles such as “Peeping Tom,” with regard to the financial investment in the Marriott Hotel project. Specifically, a deliberate and irresponsible attempt has been made to give the public the impression that the hotel investment and its control are being given away to the private investor. Nothing could be further from the truth. The facts tell an entirely different story.
Let’s look at the private investor:
- The investor will pay US$8M for 67% equity in the company, (Atlantic Hotel Incorporated--AHI). The total value of the equity is US$12 M. Equity is the value of the shares of the company or the net value of the assets available to the shareholders.
- Put differently, the private investor is only entitled to 67% of the net assets of AHI.
- Net assets = Total Assets - Total Liabilities.
- Total assets = US$58.5 M;
- Total Liabilities = US$46.5 M. This consists of loan financing arranged by Republic Bank (US$27 M), outfitting loan for the Entertainment Complex (US$4 M) and NICIL’s loan, US$15.5 M;
- Therefore Net Assets = US$58.5 M - US$46.5 M = $12 M
The investor will own 67% of US$12 M in net assets or equity, or in fact US$8 M, the same amount being invested.
The investment in the project by the private investor is a long term investment. So, for the investor to recover their original investment in dividends, it will take over nine years.
Let’s now look at the NICIL’s investment:
Some persons have compared the private investor to NICIL. NICIL wishes to clarify its investment and its returns and rationale.
NICIL is investing US$4 M in shares in the company (AHI) for a 1/3 shareholding, as against the investor’s US$8 M, and NICIL is lending the company, AHI, US$15.5 M in debt which will be repaid in full.
NICIL will, therefore, be repaid its debt in full and, in addition, will receive dividends on its
US$4 M invested in shares plus the market value of those shares whenever they are sold.
The Feasibility Study shows that the combined value of what NICIL will receive is therefore its original investment of US$19.5 M (US$ 4 M in equity plus US$15.5 M in debt) plus, an average return of 6.2% per annum on that blended investment, projected to be in excess of US$34 M over the project life. These details are set out in the feasibility study (page 17) which has been made public.
NICIL’s projected rate of return of 6.2% (average annual return) on its combined investment (shares and loan) is much superior to the 1-2% obtained on its bank deposits.
NICIL’s investment is also intended to be the catalyst to attract US$40 M of private investment and a first class brand name.
Offer was public and made available for ALL to consider
It should not be lost that exactly this offer was publicly advertised on 12 separate occasions with sufficient details for any potential investor to know what was being offered.
This offer was open to any investor in and out of Guyana.
Additionally, this information was made available to the National Assembly in a detailed question and answer submitted in March 2012 by the Minister of Finance in response to opposition questions on the project.
Nothing has changed since the publication of those advertisements and Parliamentary response of 2012.