In direct contrast to recent assertions by Cayman Islands Premier McKeeva Bush, the new owners of The Ritz-Carlton, Grand Cayman say they have no obligation to pay outstanding debts incurred by the resort developer, adding that they had tried unsuccessfully for several months to resolve the matter with the Cayman Islands government before the property was sold at auction 31 October.
“There is no legal obligation for the property’s new owner to bear responsibility for the outstanding duty, nor is there any agreement with the government for any unsecured debts owed to it to be assumed by RC Cayman Holdings,” according to a statement sent on the owners’ behalf by their local attorneys Conyers, Dill & Pearman.
On Friday, Mr. Bush told the Caymanian Compass that discussions were continuing between the government and the Ritz owners about the CI$6 million in deferred duty obligations government has claimed it was owed by the receivership companies formerly controlled by Ritz developer Michael Ryan*, and also the stamp duty on the US$177.5 million purchase of the Ritz property by RC Cayman.
“I suspect that the new owners will live up to the contract. It’s a legal document, and the government cannot afford to wipe it out,” Mr. Bush said.
On Wednesday, Conyers released the statement contradicting Mr. Bush.
“RC Cayman Holdings LLC and its subsidiaries RC Cayman Hotel Holdings Ltd. and RC Cayman Property Holdings Ltd., new owners of The Ritz-Carlton Grand Cayman, are not engaged in any discussions or negotiations with the Cayman Islands government in connection with the deferred stamp duty payments allegedly owed to the government,” according to the statement.
According to the statement, RC Cayman – which was the secured creditor on the Ritz property – “approached the Premier’s Office with a range of proposals” concerning the resort on 23 April, including payment of the outstanding stamp obligations. RC Cayman sent a formal letter to the premier 14 June “setting out in detail each of the proposals to facilitate payment of the outstanding duty”, according to the statement, and subsequently notified the premier that the sale would take place 31 October.
According to the statement, “To date, no reply – formal or otherwise – has been received by RC Cayman Holdings from the premier, his office, or the Cabinet. This is despite many subsequent attempts over several months to contact the Premier’s Office by direct and indirect means.
“The opportunity for government to resolve the matter of the deferred duty was lost with the October sale.”
The statement goes on to say that the US$177.5 million reserve price for the resort property was agreed upon by the company’s valuation experts and Government Valuation Office, and that RC Cayman “will pay stamp duty at the statutory rate without any abatement or concessions”.
At the new uniform rates for property transfers of 7.5 per cent, the stamp duty tax for the sale would be US$13.3 million, or roughly CI$10.9 million – not including exclusions for “chattels” such as furniture. (Under current law, some of the non-waterfront Ritz properties may have a duty rate of 6 per cent.)
RC Cayman Holdings’ parent company is Five Mile Capital Partners LLC, a Connecticut-based private equity firm.
The statement issued by Conyers echoes a sentiment expressed by a Five Mile representative last week, who said the sale of the hotel means the unsecured creditors “get wiped out”.
Court documents contain a review by the Deloitte accounting firm showing the receivership companies that formerly controlled the Ritz had about US$351 million in unsecured debt, including the CI$6 million the Cayman government claims it is owed.