Although The Ritz-Carlton, Grand Cayman developer Mike Ryan inferred he had financial troubles with regard to the hotel in an interview with The Cayman Islands Journal in September 2011, it was still a surprise when on 12 March, 2012, the secured lender on the property appointed joint receivers and seized control of the resort.
Working for RC Cayman Holdings LLC, the KPMG receivers, Kris Beighton and Keith Blake, said the hotel would remain open, that The Ritz-Carlton Hotel Company would continue to operate it, and that there would be no noticeable impact on operations, something that was proven out in the following months.
RC Cayman Holdings and the company that owned the hotel, Cesar Hotelco (Cayman) Ltd. then entered into a number of legal actions that continued throughout the year.
Plans to create a development called Dragon Bay that incorporated The Ritz-Carlton and other properties seized by the receivers were put on hold, but Mr. Ryan said he still hoped to develop 220 acres of adjoining property, which included the 18-hole North Sound Golf Club, that he had ownership in through a separate entity. Months later, the Dart Group announced that it had purchased an interest in the golf course, but it did not specify how much of an interest or if the investment went beyond just the golf course.
Soon after the receivers took over, there were public calls for the government to collect almost $6.2 million in deferred import duties owed by Cesar Hotelco from the time of the hotel’s construction. Copies of dozens of e-mail correspondence between Mr. Ryan and his associate and Financial Secretary Ken Jefferson and his associate were obtained by The Caymanian Compass and showed that the developer had pushed for more than two-and-a-half years for a restructuring of the schedule to repay the amount of import duty owed. Some of the e-mails from the developer’s camp went unanswered for more than nine months. Only after the joint receivers seized control of Cesar Hotelco and the resort did Mr. Jefferson end the negotiations, sending a demand letter for the entire amount to be paid by the end of 2012. By that time, Mr. Ryan no longer was in control of the company and the receivers declined to comment on the matter.
In one of the numerous legal actions concerning the property, documents filed in the case cited a Deloitte review that stated that the company that owned the Ritz was insolvent by as much as $340 million on a balance sheet basis and that it had more than $600 million of liabilities, including $250 million to the secured lender.
In September, RC Cayman Holdings announced that it would put the property, which included the hotel, unsold condominiums, and various lands associated with the development, up for sale by auction for a reserve price of US$240 million. That reserve price was later lowered to US$177.5 million.
On 31 October, The Ritz-Carlton was sold during auction to the property’s secured lender, RC Cayman Holdings for the reserve price. The new owners said they were focused on “making sure the asset continues its five-star, world-class perception” and that it continued to grow.
After the receivers took over, the Ritz Carlton underwent several renovations on its restaurants, including Blue by Eric Ripert, Seven Prime, Taikun, and part of the Silver Palm Lounge.
After the sale, the new owners stated that all of the unsecured creditors, including the Cayman Islands government with relation to the deferred import duty, had been “wiped out” after the sale.
However, then-premier McKeeva Bush told the Caymanian Compass the next day that the government still believed it could collect the deferred duty, saying the government was still in discussions about the matter.
RC Cayman Holdings then issued a statement saying that they had no obligation to pay the outstanding duty deferral and that it had tried to resolve the matter with the government for several months before the auction. It also said that it was not in any discussions about the matter with government and that any opportunity to resolve the matter was lost when the sale took place.