A deal with a US-based hotel chain to take over the former Club Med site looks close to collapse.

The Camberley Hotel Company had been negotiating for the closed St. George's resort, but now it looks as though talks have faltered after the company asked the Government to back tourism with more than words.

And The Royal Gazette has learned that Atlanta-based CHC president Ian Lloyd-Jones sounded a warning to the Progressive Labour Party over its bid to attract new hotels and investment to the Island.

Tourism Minister David Allen refused to talk about specifics of the deal, but revealed another player had shown interest in the property.

The group, understood to be a renowned hotel chain, has looked at the site and have held meetings with Mr. Allen over the last month.

They entered the frame as Camberley ran into difficulties finding investors for a portion of a possible $30 million needed to renovate the hilltop site.

But it is understood the company got cold feet after getting a lukewarm response on the possibility of Government providing a financial surety for part of the investment.

The company asked the Government to show its confidence in the hospitality industry by guaranteeing a percentage return on part of the investment.

The deal would have been for a limited period and would only have kicked in if the hotel failed to make the required level of profit.

Mr. Lloyd-Jones said: "We are still interested. But having spent the last 18 months on this project we have concluded that unless the Government is prepared to put up some kind of security to guarantee a portion of the equity, then it is probably not going to happen in the near future.'' "We continue to be optimistic,'' he added. "We would hope that the Government would respond to our request we have made to say `yes' as landlord.'' And he said there would be a need to consider similar deals as other companies looked at Bermuda.

"It will need this type of creative financing approach no matter who does this deal,'' Mr. Lloyd-Jones said.

He also noted there was investment cash available, but there was a degree of uncertainty about Bermuda and a perception that it was a tough place to make a profit.

Mr. Allen confirmed discussions had taken place about Government involvement in the project, but added that they were "not in the hotel business''.

The Minister said he was trying to get the best deal for Bermuda and it would likely be 2001 before the Island saw any development.

He added that he was anticipating an agreement in principle by the end of the summer.

"We are more optimistic than we have been for some time,'' Mr. Allen said.

"We are going for a more in-depth fix to get a quality project. It has a high priority. I have been personally involved in talks.'' It is understood officials from the investment group will be visiting the Island next month to continue their look at the site.

Editorial: Page 4