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Debt limit raised to $2.75bn

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Bermuda's debt ceiling will be raised by $250 million after Curtis Dickinson, the Minister of Finance, tabled legislation allowing the Government to pay lenders over the failing Caroline Bay development.

The Government Loans Amendment Act increases Bermuda's debt limit to $2.75 billion.

MPs met in an improvised chamber on the third floor of the Veritas Place office block on Court Street, while Sessions House undergoes renovations.

Mr Dickinson condemned the former One Bermuda Alliance government for putting the island “on the hook” for a guarantee of $165 million backing the project at Morgan's Point three years ago.

He said a credit facility of up to $200 million had been negotiated with local banks, with the $165 million to be paid next week.

This will end the Progressive Labour Party administration's plans to avoid raising debt this fiscal year. Construction ground to a halt at the former United States military base late last year due to financial problems.

Two Bermudian contractors on the project confirmed yesterday that their companies remained unpaid for their extensive work.

Mr Dickinson said the Ministry of Finance had been in discussion with ratings agencies over concerns that the island could suffer a downgrade.

Mr Dickinson told a press conference: “These extraordinary circumstances and the liabilities triggered by these defaults, have resulted in the Government having no choice but to raise the debt ceiling, in order to borrow monies to fund the payments, as set out in the guarantees.”

Former finance minister Bob Richards had provided credit facilities on behalf of Morgan's Point Limited for use in the construction of the hotel and condominium project in March 2016.

Mr Dickinson said: “What the people of Bermuda did not know was that even before the marina had opened, the Caroline Bay project was experiencing difficulty.

“This had to have been known to the OBA Cabinet and the developers who persisted in providing public updates on the project which were inaccurate.

“Despite the financial viability of this project having been in question for many years, the OBA government guaranteed much of its lending even as this project continued to be beset with difficulties.

“Despite extensive efforts by myself and the Premier to support the developers, they have defaulted on the terms of the loan agreements with their lenders.”

He added: “While this government did not enter into the deal that placed the people of Bermuda ‘on the hook' for the debt consequent upon the failure of this development, we are responsible for resolving the negative and unfortunate outcomes from the deal negotiated by the former government.”

Both Mr Richards and Craig Cannonier, the Opposition leader, disputed Mr Dickinson's claim that the OBA administration had acted irresponsibly.

Mr Richards said that no financing issues had ever been raised with him during his tenure.

Mr Cannonier said OBA members had met “several weeks ago” with developers at the project, known as Caroline Bay, and discussed “a plan for new investment” from billionaires.

He said developers met also with the PLP and David Burt, the Premier. Mr Cannonier further queried the motive for the $250 million debt threshold, set at $85 million more than the guarantee.

A ministry spokeswoman responded last night: “Neither the new borrowing nor the revised debt ceiling amounts have been determined for any purpose other than to fulfil the Government's obligations and exercise of its rights under the respective guarantees for the Caroline Bay project.

“Ideally, the Government would not draw any additional funds other than the amount needed to purchase the interests of the tranche B and C lenders.”

Mr Dickinson identified tranche B as “institutional investors, principally in the US” who were owed $80 million, and tranche C as local insurers Axis, Arch and Validus.

Validus sold its loans to the other two firms “at some point last year”, Mr Dickinson said.

The spokeswoman said the ministry would seek professional advice on whether the Government would face other potential liabilities.

She added: “Without this advice, borrowing or establishing a debt ceiling without room for contingency would be irresponsible.”

According to Mr Dickinson, the Government will now “acquire the valid claims of Bermudian companies”.

The minister said: “Finally, we must bring this project to conclusion.”

Mr Richards said yesterday that this remark implied that Mr Dickinson intended to “kill the project”, which the finance minister said was “incorrect”.

Mr Dickinson added: “What we have done today, is fulfil the sizeable obligation the former government placed on the people of Bermuda, and our stated intention is to use our best efforts to protect that investment. I wish him well.”

To read Curtis Dickinson's remarks in full, click on the PDF under “Related Media”

Unfinished residential units at the Caroline Bay complex in Morgan's Point (File photograph by Blaire Simmons)

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Published September 14, 2019 at 9:00 am (Updated September 16, 2019 at 7:32 am)

Debt limit raised to $2.75bn

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