Fiesta Inn goes into receivership
The deal had been rumored for weeks and today a story in the Belize Times made it public. After almost ten years in business and millions of dollars in losses the hotel operation known lately as the Fiesta and more fondly as the Ramada, has been put into receivership. What this essentially means is the hotel owed so much money to its creditors and was so far behind in its payments that there was no choice but for the mortgage holder, the Belize Bank, to step in and try to salvage the situation by appointing a receiver, in this case Stanley Ermeav of K.P.M.G.
But the story of the hotel’s demise and future prospects is a bit more complex. The project was the dream of Houston investor Edward Carette, whose family had successfully run major hotels in Guatemala for years. Cost and time overruns during construction put the project in trouble from the start and a huge glut of hotel rooms on the Belize City market ensured that things would get no better. New investors were found to offset the continued losses, including the Belize Social Security Board which, under the Esquivel administrations, pumped in three point two million dollars for around ten percent of the company’s equity. But all the new money and changes in management could not stop the downward spiral or service the loans received from the U.S. Overseas Private Investment Corporation (OPIC) and Bank of Nova Scotia. As interest and principal arrears mounted the total indebtedness is said to have reached around twenty million Belize dollars.
Matters came to a head when G.A. Roe and Sons obtained a court judgement to get paid for the hotel’s insurance coverage and they began to crow foot various hotel assets. At some point last month the Belize Bank entered the picture with an interesting move. It purchased the outstanding debt from OPIC and Scotia… at a substantial discount. Although all parties to the deal contacted by News Five declined to confirm a figure — or make any comment at all — our sources report that the purchase was at no more than fifty cents on the dollar and was perhaps as low as forty.
As things now stand the investors have been pretty much wiped out, the original lenders escaped with part of their money and the Belize Bank, through the receiver, must now figure out a way to make a profit off a hotel that has never managed to come close to profitability. The possibilities are several, the most likely option being to put the hundred and nineteen room hotel up for sale in the hope of finding a buyer with the expertise and deep pockets to turn it around. What is not known at this point is whether the present owners plan to close the place — and put over a hundred employees out of work, — keep it open at the present level of service or invest new funds to upgrade the property and hopefully attract a premium price. The Belize Bank’s parent company, BHI, already owns the Radisson and has not been afraid to invest aggressively on that project. Where government stands on the issue is also a matter for speculation. Social Security took a hit along with the other foreign shareholders but that was inevitable as the hotel was going bankrupt in any case.
If the receiver continues to operate the hotel — indeed the Bellevue has been operating in receivership for years — then the Belize Bank deal will have saved a good number of jobs and spared the new government the embarrassment of seeing the nation’s largest hotel close its doors just when the Prime Minister and Cabinet are proclaiming a new era of investor confidence and opportunity.
