Payment of $8.2m draws line under City’s battle with lender
A “full and final” settlement was reached after a lengthy dispute between the Corporation of Hamilton and a company that lent money to jump-start a city hotel development which never broke ground.
The agreement with Mexico Infrastructure Finance included a payment by the municipality of $8.2 million, funded through a loan from Clarien Bank.
Its details were made public in the corporation’s 2024 audited financial statements, which were released today.
Figures showed that the CoH generated $27.22 million in total revenue last year and recorded $28.01 million in expenditures.
The corporation, which noted its statements were presented with an unqualified opinion from independent auditors, said that it ended the year “with a modest shortfall of $789,891 before adjustment for one-off items”.
It added: “That’s a shortfall of less than three cents on the dollar, showing strong fiscal control in a year of increasing costs and continued investment in public services.”
The two sides in a long-running legal dispute over a development in Hamilton that never materialised issued a joint statement on their agreement to end the proceedings.
“The Corporation of Hamilton and Mexico Infrastructure Finance LLC advise that they have reached a full and final settlement of all the disputes and issues between them arising out of the failed development of the Par-la-Ville Car Park into a hotel in 2014 by Par-la-Ville Hotel and Residences Limited.
“MIF extended financial support to PLV to facilitate completion of the hotel development and to secure a significant investor. CoH played a supportive role by offering various forms of security. The monies were released to PLV, which in turn wrongfully distributed and lost them to entities associated with Robert McKellar in the United Kingdom.
“CoH has consistently defended its position since a new mayor and council took office in 2015, arguing that the previous administration had acted beyond its legal authority.
“Given the potential to incur further significant time and legal costs in litigating this dispute, MIF and CoH have agreed that it is in their mutual interest to bring this chapter to a close.
“They are able to report that a good-faith settlement has been reached. This agreement entails CoH making a payment of $8.2 million to MIF, the retrieval of property deeds by CoH and the conclusion of all current and potential legal proceedings in both Bermuda and the United States.
“MIF and CoH have also settled confidentially with other involved parties.”
Notes to the statements detailed the protracted history of the corporation’s relationship with MIF, the roots of which date back to 2012 when the municipality entered into a development agreement and ground lease with Par-la-Ville Hotel and Residences Ltd to build a luxury complex at the Par-la-Ville car park.
MIF, PHRL and the corporation executed a credit agreement in July 2014.
In the deal, MIF agreed to loan PHRL $18 million as bridge financing for the project’s construction and the corporation pledged to provide a mortgage over the car park property and to guarantee the loan.
MIF, PHRL, the corporation and the Bank of New York Mellon — the escrow agent — entered an escrow agreement.
The notes said: “Under the terms and conditions of the escrow agreement, the escrow agent was to hold the loan proceeds until such time as PHRL had secured permanent financing comprising debt of $225 million and equity of $100 million or a ‘substantially similar financing structure from the permanent lender’.
“The corporation authorised the release of the funds from the escrow account in October 2014 based on an agreement reached between PHRL and Argyle Ltd, a company which PHRL represented to the corporation as the permanent lender.
“Due to the default on repayment of the loan by PHRL, on December 30, 2014, MIF initiated legal proceedings against the corporation and PHRL.”
Since then, the matters have tied up courts in Bermuda, the US and Britain, with a judgment handed down in the Southern District of New York eventually ruling in July 2023 that MIF was entitled to recover from the corporation $22.5 million — an amount that accounted for interest.
The notes pointed out: “The corporation was required to record this potential liability in the financial statements as an expense in the prior year ended December 31, 2023.
“Legal advice was sought on whether this was enforceable in Bermuda … The corporation appealed against the US ruling.”
They said: “On October 21 and 22, 2024, the corporation and MIF reached a full and final settlement of all the disputes arising out of the failed development to build a luxury hotel and condominium residence on the Par-la-Ville car park.”
The notes explained that the municipality agreed to make “a one-time payment of $8.2 million in exchange for the retrieval of property deeds and the conclusion of all legal proceedings in both Bermuda and the United States”.
They added: “To fund the settlement, the corporation obtained a loan of $8.75 million from Clarien Bank on February 25, 2025.
“The loan is repayable over a ten-year period through fixed monthly instalments secured against the corporation’s revenues from car parking and ships wharfage.
“The corporation has budgeted for these repayments in its long-term cashflow forecasts.”
A bid by the Corporation of Hamilton to prevent the Government from turning it into an unelected quango continues to await a ruling by Bermuda’s highest court of appeal.
Legal action was launched more than six years ago by the corporation against the Attorney-General and the Governor, alleging that the Municipalities Reform Act 2019 was unconstitutional.
Under the legislation, the minister responsible for municipalities would appoint the mayors and half of the councillors for Bermuda’s two corporations — including the Corporation of St George — and the other councillors would be appointed by the minister on the recommendation of a selection committee.
The Bill was passed in the House of Assembly but defeated in the Senate.
Notes to the corporation’s financial statements said: “In July 2020, the Government of Bermuda announced that it intends to continue with the proposed implementation of the reform Act or similar new legislation.
“In March 2019, the corporation filed a court case with the Bermuda Supreme Court on the basis that prior amendment acts and the proposed reform act infringe upon the constitutional rights of the corporation.
“The Supreme Court rejected that claim in a judgment handed down on March 31, 2021.”
An appeal filed by the corporation was dismissed in March 2022 by the Court of Appeal, after which the municipality took its case to the Judicial Committee of the Privy Council in London, where the case was heard last December.
“The corporation is still awaiting the final judgment,” the notes said.
“While the legislation may impact the legal form of the entity, the activities of the corporation are unlikely to be altered.
“On this basis, management of the corporation does not consider that the matters relating to the potential amendments to the legislation result in a material uncertainty related to going concern.”
In a statement to media that accompanied its financials, the corporation said that its $27.22 million total revenue for 2024 was a notable increase from the $26.79 million recorded in 2023.
It added: “This represents the highest annual revenue ever achieved by the corporation.”
Strong performance in car parking fees was said by the municipality to be a factor in revenue growth, with $5.23 million collected in 2024 — the highest ever recorded, driven by higher usage and improved enforcement measures across Hamilton.
The corporation said that an increase to $8.05 million in goods wharfage — up from $7.91 million a year earlier — reaffirmed Hamilton’s role “as a commercial gateway”.
Dock charges, rent from properties and miscellaneous income were also said to have played parts in the generation of revenue.
“The increased revenue was unfortunately offset by higher expenditures,” the corporation noted.
“In 2024, expenditures increased from $26.3 million in 2023 to $28 million in 2024.”
Key expenses included administrative and general expenses, which rose by $896,000 to $10.24 million, “largely due to legal fees and increased wharf depreciation because of the completion of the Pier 6 upper level”.
Costs for sanitation services were up by about $246,000 to $4.04 million and works depot expenses increased by about $274,000 to $3.2 million.
“The corporation experienced breakdowns in several of our vehicles this year, which resulted in increased maintenance costs,” its statement said.
“Sewerage maintenance jumped by $254,000, due to emergency repairs on Bermudiana Road and the installation of new pumps at the Laffan Street and Woodlands Road pump stations.”
The municipality added: “Despite the rise in operational spending, the corporation’s financial outlook remains strong.”
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