There Is A Four Seasons....Turn, Turn, Turn...

One of the most visible signs of the economic problems facing Barbados has been the stalling of the Cinnamon 88/Four Seasons/Paradise hotel and private residences project on the west coast. It has had its share of international interest not least because of the media glitterati who stood to go up in smoke and ashes if the project disappeared without trace. Simon Cowell, of American Idol fame, being among that group, which could easily have been renamed "I'm here again, idle".

Today's papers indicate that this is now set to resume (see Advocate report). In a deal brokered by Professor Avinash Persaud, the project will be refinanced, with the agreement of lenders, creditors, private residence owners, shareholders and developers. Kudos to Prof. Persaud for getting the parties to agree on this. The Barbados Government puts itself into the frame as a supporter too: the deal will allow Government to gain an equity share in the project, while guaranteeing the repayment of the loan. The plan includes a US$60 million facility from Ansa McAL Merchant Bank and its Barbadian affiliate, Consolidated Finance, that allows for a repayment of the Bank of Scotland loan, the acquisition of the Esso land to complete the site, a settlement with creditors, and the recommencement of construction.

The government will have a ‘golden share’ to guarantee its interests versus other shareholders and a charge on the assets of the most significant development to occur in Barbados for some time. The PM is clearly optimistic about the whole thing, saying "When these dark days of global economic challenge are behind us, we will come to see this moment as one of our finest hours.” Words like that have a habit of coming back to haunt, and one wonders whether Barbados en masse, with its already heavy debt burden will see the government guarantee in the same Churchillian 'finest hours' terms. While the government may enjoy eating a lovely cinnamon-toasted bagelnow, I hope that it does not end up with just toast, or the hole in the bagel.

The deal calls for the creation of a new management board to be appointed under the Executive Chairmanship of Prof. Persaud.

It's clearly too early to say whether or not this is a good deal. The project, stalled for many months in 2009, has yet to restart, but that is foreseen this calendar quarter. A lot of people have not been working or earning while the project lay idle, and their prospects are less bleak, though not clearly bright. Some contractors are owed monies too for work done previously. As contracts are being re-tendered, it's not clear who will be working again, or working anew, and who will be paid and when. Will Chinese workers be retained? Will Bajan workers and companies get a piece of the pie? Will former management be pushed out and have reason to cry 'foul'? Whose arm will be twisted and nose tweaked to ensure that these aspect does not turn into a PR disaster for the government? So, we may have some contentious months ahead in sorting that out.

The role of government may also come in for some scrutiny. I'm happily reading "Too Big To Fail", about how the US financial world dealt with the turmoils of the sub-prime crisis, and how government had to step in to save some institutions but did not step up for others. Economists often worry about 'moral hazard', where a party by being protected from certain risks acts differently than they should. It will be a matter to be tested whether the government's stepping in is seen as needed in a 'too big to fail' sense, or if it suggests that it may have to do so more widely to help the economy weather the current economic storm. Skeptics will also be looking to see if and when the government steps away, or if this public holding of private hands is a new dance that will be hitting the floors this year.