Dear Editor,
Former Prime Minister Mr. Sam Hinds commented on 16 October 2015 on my article entitled “Will NICIL be different?” that appeared in the Business Page of Stabroek News on 11 October 2015.
In his letter, Mr. Hinds accused me of seeking to “deliberately mislead the public” about the soundness of the Marriott deal that from all the available evidence calls into question the soundness of his knowledge and judgment of the matter. He challenged also my understanding of the folly that his government called a great investment using a yardstick that caused his government to be measured as corrupt and arrogant. As such, I have five regrets about Mr. Sam Hinds’ comments on my article in reference.
The first regret that I have about his comment is that Mr. Sam Hinds added nothing factually new to the discussion on an issue of financial significance to the taxpayers of this country. Without regards for the taxpayers of Guyana, he failed to explain why he chose to support the idea of selling two-thirds of the equity of the Marriott for US$8 million. His response, being ambiguous, cryptic and lacking substance, appears synonymous with the kind of leadership that many Guyanese thought he offered Guyana for 23 years. Consequently, I could only conclude that the purpose of his letter was to provide derogatory treatment of a serious matter. I want Mr. Sam Hinds and every one of his cohorts to know that no smear campaign would deter me from speaking about the ills of his government when I need to do so.
The second regret that I have is that Mr. Sam Hinds continues to mislead the people of Guyana when there is no need to do so. Without presenting facts or figures, Mr. Hinds proceeded to create a false impression of the Marriott deal. I wish to remind Mr. Sam Hinds what my position on the matter is. It is my understanding that the construction of the hotel to date is estimated to cost US$60 million. Recent information indicated that the government was only able to borrow US$15 million. The equity in the company is therefore an estimated US$45 million. Mr. Sam Hinds’ government was selling two-thirds of the equity of the company. That amounts to a value of US$30 million. The minimum selling price of the company should be US$30 million. Based on information in the public domain, Mr. Sam Hinds’ government wanted to sell the two-thirds equity for US$8 million or at a loss of US$22 million. If that is not a discount, I do not know what is.
The third regret that I have is that Mr. Sam Hinds still sees nothing wrong with using the money of taxpayers to build a hotel that they did not ask for and then leaving them to bear the loss.
Mr. Sam Hinds proceeded to add a component of debt to the discussion. The fourth regret that I have is that Mr. Sam did not tell us how much debt, if any, his government was transferring to the investor. Even with all the debt going to the potential investor, the investor’s maximum payment would have been about US$23 million. The last time that I checked US$23 million was less than US$30 million. Let us get to the ABC of business and accounting. I believe that Mr. Sam Hinds is confusing the valuation of the company with the capital structure of the company. Valuation is used to determine the price at which the assets are sold and hence the capital structure that might emerge, debt and equity. Typically, when serious people are going to sell an asset with good value, they also include in the value or price the future earnings of the business asset. The overall sale price therefore should have been US$30 million plus the present value of the estimated future earnings of the business. That is part of the ABC of business valuation and accounting. I chose not to include that fact because I wanted to keep the article simple and I do not have enough information to value the future earnings of the company. Mr. Sam Hinds has not told us in his letter what future earnings his government expected to come from the Marriott investment that it made. He could not because he appeared never to have thought of it, and if he did, then to sell two-thirds of the equity for a mere US$8 million meant that he believed that the Marriott would lose money. Even if we included all the debt, the investor would still be paying far less than the true value of the hotel.
Some experts on this matter feel that the true value of the Marriott is closer to US$100 million. The Marriott is not a bad asset, but yet Mr. Sam Hinds was willing to give it away for a mere US$8 million. If that is not an affront to the taxpayers of this country, then I do not know what is. Somebody would have had to make up the difference between the cost of building the hotel and the price Mr. Sam Hinds wanted to accept for the share that he was selling. It would have been the taxpayers of Guyana and that would be consistent with subsidizing the investment of the private investor.
The fifth regret that I have is that by his letter, Mr. Sam Hinds confirms that he remains remorseless about the bad leadership exhibited in the Marriott and other deals that he gave to this country and the imposing burden that his government wanted to place on the struggling taxpayers of Guyana.
It is my hope that the next time Mr. Sam Hinds is going to comment on this matter he would offer the Guyanese people the facts with which his government was working.
Yours faithfully,
Rawle F. Lucas
