The Tribune

By NEIL HARTNELL

and YOURI KEMP

Tribune Business Reporters

The joint venture purchaser/developer of Freeport’s Grand Lucayan resort last night said it has “secured the required liquidity” for its planned $300m project and will shortly discuss “timelines” with the government.

Robert Shamosh, Holistica Destinations’ chief executive, in an e-mailed response to Tribune Business inquiries reaffirmed the company’s “commitment” to proceeding with an investment deemed vital to reversing Freeport’s years of economic and tourism decline despite COVID-19’s shutdown of the cruise ship industry.

While no specifics in terms of construction start dates and other project milestones were provided, the statement sent by Mr Shamosh said Holistica - the joint venture between Royal Caribbean Cruise Lines (RCCL) and Mexico-based ITM Group - was already in talks with banks and other lenders to secure the necessary project financing.

“Holistica Destinations confirms that we remain committed to, and are moving forward with, the proposed development on Grand Bahama. BPI, Holistica’s subsidiary, recently announced it has secured the required liquidity to develop the Grand Bahama project and is currently working with several financial institutions to secure the financing,” the statement added.

“BPI will be meeting in the next couple of weeks with The Bahamas government to further discuss project details and timelines.” The cruise industry’s global shutdown, and the multi-billion losses sustained by the various lines, are guaranteed to delay any new investment by the sector in projects such as the redevelopment of the Grand Lucayan and Freeport Harbour.

It is so far unclear whether such delays will be one year, two years or even longer, but Mr Shamosh’s comments indicate that the Holistica still intends to proceed with a project that was signed-off by both developer and government just two weeks before the COVID-19 pandemic gripped the entire world.

Acknowledging that the timing and extent of any cruise industry resumption remains “fluid”, the statement added: “Holistica is also working very closely with the cruise lines to develop strategies to enhance health and safety protocols to adapt to the current pandemic environment, which will allow for an increase of cruise ship visits to Grand Bahama even before the completion of the project.”

Holistica was described as an “independent, self-sufficient, destination development company”, implying that its financial health is not necessarily dependent on that of either Royal Caribbean and ITM Group.

Meanwhile, Carnival told Tribune Business it is continuing to work on obtaining the necessary approvals and permits for its own $200m Grand Port project in Freeport. It acknowledged, though, that it had been forced to “pause” all investment and capital expenditure activities due to COVID-19.

Vance Gulliksen, a Carnival spokesperson, said: “We continue to work with the Government of The Bahamas on the permitting process at this time. As the world continues to work through the challenges we are facing due to the COVID-19 pandemic, we have currently paused our global cruise operations - which includes port development activity - for the safety of all of our crew, guests and destination partners.

“Once permits are granted and we are able to determine when we can safely operate again, we will evaluate the timing of all operations and development projects.”

Mehmet Kutman, Global Ports Holding’s chairman, told Tribune Business at the weekend that he foresaw no investment activity at either Grand Bahama cruise line project for 24-36 months due to the financial fall-out from COVID-19.

He argued that filings with the US capital markets regulator, the Securities & Exchange Commission (SEC), showed that neither Royal Caribbean nor Carnival could undertake such massive expenditures as a result of the loan terms agreed with the lenders who funded the recent multi-billion dollar capital raisings intended to help them ride out COVID-19.

“The Freeport developments, the cruise lines in question cannot make any investment for 36 months due to the covenants of the loans they took out,” Mr Kutman said. “I don’t think there’ll be any investment for 24 to 36 months.”

While the Holistica and Carnival projects will undoubtedly be delayed at the very least, the SEC filings reviewed by Tribune Business indicate that the loan terms only impose restrictions on what the cruise lines can do with the proceeds of their latest borrowings rather than any limits on how future financings can be used.

The Government has been fretting over the fate of the two Freeport-based cruise line projects ever since the industry’s global shutdown and subsequent COVID-19 tourism and economic crisis.

Dionisio D’Aguilar, minister of tourism and aviation, last month told Tribune Business he was “on his knees” hoping both projects pull through. He acknowledged that both Carnival and Royal Caribbean were likely to adopt a “wait and see” approach to those investments once the COVID-19 pandemic eases due to the major financial blow they have suffered.

And, disclosing that the Government “hasn’t heard anything yet” on either development, the minister said his “whole arms are crossed” in the hope both cruise lines will eventually proceed - albeit with some delay to construction and opening schedules - once the global health crisis has abated.

The minister conceded he was “scared” to inquire as to Carnival and Royal Caribbean’s plans, and said then: “My whole arms are crossed. I’m on my knees hoping they come through. I’m scared to call them. It’s very, very unfortunate.

“We haven’t heard anything on the projects in Grand Bahama, but what I predict - and what I presume - is they’ll probably want to wait and see how their business comes back before they undertake any major international capital projects.

“The best case scenario is no delay and they go forward, but we don’t know how long COVID-19 is going to last in its current form. We’re in the middle of the surge and there’s no cure, so we don’t know how that will change travel patterns for every mode of transportation. We’re in uncharted territory. It’s a huge uphill battle.”

And K Peter Turnquest, deputy prime minister, expressed similar sentiments in a Zoom conference with Old Fort Bay Rotary members. “As we understand it, today those projects are still on although admittedly delayed, and we just hope they come through and we come to the bottom of this economic challenge relatively quickly,” he said.

“We’re hanging on by our finger nails, in my opinion, The Bahamas generally and the Government, as far as the hotel is concerned,” they said. “They [Royal Caribbean/ITM] won’t be ready to do that for 12 months at least. They won’t be making money for at least that period. They’re going to lose billions as a result of this pandemic.”