there is not enough support for a new hotel on the Bermudiana Hiotel site.

The firm has decided to proceed with the construction of the office building and is only submitting its office building plans to planners for final approval.

Construction of the hotel -- which was to be managed by the prestigious Four Seasons Group -- and apartments will now be done in later phases, BFCL president the Hon. Michael Winfield said in a letter to shareholders.

Trading of the company's preferred shares was also halted on the Bermuda Stock Exchange yesterday after Mr. Winfield said the company would be proposing to shareholders that they be converted to ordinary voting shares.

The company has indicated a plan to apply to the exchange to list the common shares and to offer more shares to the public.

Mr. Winfield said a report from the company's financial advisors -- Bank of Bermuda subsidiary, Bermuda International Investment Management Ltd. -- said that "from an investment perspective, there was insufficient support for a new hotel project at this time''.

"The report did, however, state that there was significant interest and demand for the offices. The report further advised that the best course of action was to phase the project,'' he said.

Planners have invited the submission of the project for final planning approval in phases, submitting the office development part only at the moment for consideration.

BFCL's hotel proposal had been opposed by neighbouring hotel owners, including the Princess Hotel's. The opponents recently lost a Supreme Court application to have its planning approval overturned.

Mr. Winfield said: "We will retain the right to submit the residences and hotel elements at a later time. The phased project will enable us to move ahead quickly with the office portion of the project.

"Securing the necessary tenants for the offices remains a priority. I am delighted to advise that we are dealing with significant interest in the space we have available.

"During the last few months, we have been negotiating for confirmed tenancy agreements and now project that this process will be completed in December.'' Mr. Winfield said the original structure contemplated the conversion of the preferred shares and debentures into common voting shares resulting in one class of security.

He said it was evident that a change of structure would be necessary and as a result the company and its common shareholders have agreed, subject to the approval of the preferred shareholders, a plan for capital restructuring.

The plan will mean the conversion of all outstanding convertible preferred shares to common shares with voting rights. A common share rights offering will be used to raise the additional required equity.

A detailed information package is to be sent to shareholders next month and a special meeting will follow for shareholder approval on January 3, before a prospectus is prepared and circulated.