Ritz owners: Gov’t missed chance on stamp Duty

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.
 

 

Editor’s note: This story has been updated from the original for clarity.
 

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8 COMMENTS

  1. Bush said…..Why is anyone still listening to what Bush believes? Caymanians should get their information from the experts and leave the crap that comes out of this mans mouth to those who have to listen to him or get a real job.

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  2. It’s a bit weird, the collecting government now at default because of failure to resolve the Ritz proposal (or appeal whatever you call it) on time?

    It should be the government call to or not to hear the appeal and the tax becomes due immediately.

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  3. So let me get this straight, the deferred un-collectable duty is CI 6 million.

    Moreover, the forced sale which would otherwise never had happened unless the original owners were bankrupt generated CI 10.9 million in new duties, if that’s collectable.

    Seems to me the net result is a benefit of found money to be deposited into Government vaults is in the amount of CI 4.9 million.

    Furthermore, once the hotel is back on solid footing the current owners will probably re-sell at a huge profit generating millions more in duties to be deposited.

    Cry if you want but I don’t feel sorry for poor Government.

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  4. When you let a cowboy try and do business with the brass of the business world, can you expect anything different.

    As usual this man is out of his league and cannot use his loose canon approach to business.

    Doing business with the lawyers of the new owners and Bush on the other side is just not a fair fight. Its like taking a knife to a gunfight. In this case, guess who has the kinife.

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  5. So let me right this straight the new owners were owed 177M dollars out of 500M of debt so they put the Ritz into receivership then the new owners organised a bid for the hotel with a reserve of 177M. They won the bid and wrote off the other 300M in debt so basic got the hotel for free. They now say the government 6M is lost.

    Well I say the firm that were the administrators should pay the 6M as they basically gave the hotel away and the new owners should the stamp duty. The new owners should not get the lands survey transfer until ALL Government duties are paid. Also for Bush – what is a politician doing interfering with non political business? If he spent more time on running this country instead of doing private deals on behalf of this country we would not be in this mess.

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  6. @AlmostCaymanian
    The new owners are the mortgage holders. They were NOT owed 500 million, that includes other debts.

    The stamp duty on the foreclosure sale should be paid by the highest bidder, in this case the lender. I’m not sure about the law in Cayman, but in Florida the court will not issue a Certificate of Title UNLESS the stamp duty on the sale is paid.

    Regarding the previously owed stamp duty and import duty that was never collected by the CIG (no idea why)
    this would also be a governmental lien under Florida law and would NOT be wiped out by a foreclosure.

    I do not know if this is the law here. But if not it certainly should be!

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  7. AlmostCaymanian, DonQuixote – The way I understand it is that the 6m debt was Ryan’s and he failed to make his instalments since the UDP came to power. No steps were taken by the Govt to get payment but now instead of Ryan the Premier is looking for the new owners to pay Ryan’s debt.

    Apparently the new owners were owed 250m but the property was only valued at 177m by Govt and private valuers. I don’t see how buying the hotel against 177m of the debt owed is getting the hotel for free when it is really costing them 250m but they are getting only 177m in value.

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