LAST APRIL, Neal & Massy chief executive officer Gervase Warner revealed that Barbadian hotel group Almond Resorts Inc. would have folded were it not for the Trinidadian conglomerate’s cash injections.
He said shareholders in the listed company were complaining about the drain Almond had become on Neal & Massy’s finances and they wanted the company to find a solution.
Neal & Massy gained 51 per cent ownership of Almond after its 2008 takeover of Barbados Shipping & Trading (BS&T) – the largest shareholder in Almond Resorts.
However, the 600-room hotel group which employs more than 1000 workers was hit by four years of persistent losses, with Neal & Massy and another investor – Goddard Enterprises Limited (GEL) – forced to write off nearly $50 million between them.
Warner indicated in the April 4, 2011 BARBADOS BUSINESS AUTHORITY that by the middle of that year the company would have been in a position to reveal what it had planned for the struggling investment which reported staggering losses of $20 million in the previous year.
Big stretch
He said Almond Resorts expanded from two to five hotels under management but the timing could not have been worse.
“That was a big stretch for the management team and . . . those hotels opened into the worst tourist season Barbados has seen – even worse than [after] 9/11.
“So not only did you have finance cost incurring because money was borrowed to open these hotels, but now we had operating losses,” Warner said.
“Over the course of the last two years, going on three years, those operating losses have continued. While the banks have been supportive, it is a really fortunate thing that Neal & Massy became the 51 per cent owner of Almond Resorts because I shudder to think what would have happened if they were on their own.
“If [Almond Resorts] were on their own, they would not have been able to sustain themselves,” he added.
He pointed out that commercial banks continued to extend credit to the hotel group on the strength of its Neal & Massy ownership.
Further funding was also provided by the parent company.
Following the announcement of the pending closure, the Almond’s board noted in a statement that while three potential buyers are currently in discussions to purchase the Beach Village property, those negotiations are likely to take several months before a deal can be concluded and all current options require the closure of the property.
During a special meeting of Almond Resorts Inc. (ARI) shareholders on April 3, the board of directors said this decision was “regrettable but compelling at this point in time because the hotel would become unable to pay its bills”.
“Almond Beach Club, however, has buyers who are closer to making a decision and could be sold as a going concern within a reasonably short time, if negotiations proceed well.
“Given the constraints of no additional cash injections to fund the significant negative cash flows that are projected for Almond Beach Village, the hotel will not have enough revenue to pay its bills,” the board said in a statement.
It was noted that the only way the property could be sustained would be with a significant injection of additional capital, which was not forthcoming from the bank, shareholders or other investors.
Furthermore, potential buyers who have engaged with the ARI board for the Village were not interested in maintaining it as a going concern but were only interested in the physical asset.
Warner assured the meeting that the board of directors remained open to proposals from the employees and the Government but such a proposal would need to have support from Scotiabank or another financial institution and would need to demonstrate how new capital would get injected into the company for the necessary upgrade to the Beach Village property.
It was initially hoped that Almond’s 1000 employees might be able to help save the group.
The March 7, 2012 MIDWEEK NATION reported that Ralph Taylor, then chief executive officer of Almond Resorts, had met with staff of Almond Beach Village in St Peter and Almond Beach Club in St James to discuss a “buyout proposal” that would require staff and management to give up ten per cent of their salaries as an investment.
However, Warner said while the idea of voluntary salary cuts was worthy of praise, it was not enough to keep the hotel group afloat.
He told the March 28 MIDWEEK?NATION that the financial troubles facing the group of three hotels were just too mammoth for the employees to solve.
Meanwhile, the March 15 DAILY NATION reported that the Barbados Government was not prepared to bail out cash-strapped Almond Resorts Inc. in light of the problems with the Gems Of Barbados project.
Facilitation
Minister of Tourism Richard Sealy stressed the need for a private sector-led solution and said Government’s involvement would only be facilitatory at this stage.
“I cannot and I will not support another Hotels and Resorts Limited [the company that ran Gems] . . . ; $275 million and 15 years later you still had to turn around and get a private sector resolution. We will not have any repeat of that situation,” he said to the tune of loud thumping on the Government side.
Sealy added that if the National Insurance Scheme, which had pumped $60 million into Four Seasons Resorts, could play a part in assisting Almond, “so be it”, but “we have to work out a private sector resolution”.
“We have been in discussions with [president and CEO] Gervase Warner and Neal & Massy for a while. We are well aware of the importance of the Almond Group and we’re doing all [we can] to keep that going well,” added the minister.
A number of high-profile businessmen have indicated their interest in Almond Beach Village, including construction magnate Bjorn Bjerkhamn of Jada Construction Limited, Jamaican hotelier Gordon “Butch” Stewart of the Sandals all-inclusive hotel group, and Crane Resort owner Paul Doyle.
Doyle had indicated that if he is successful in his bid to purchase the property, he would keep approximately half the rooms open in the early stages while construction takes place on others, thereby helping to preserve jobs.
