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New Yorks DLJ Is New Landlord Of Ritz-Carlton San Juan Hotel
Buys Gdbs Debt Stake In Hotel And Seeks Ownership Rights
BY EVELYN GUADALUPE-FAJARDO
October 3, 2002
The Government Development Bank (GDB) has sold its $85 million Afica bond debt for the Ritz-Carlton San Juan Hotel, Spa & Casino to New York brokerage firm Donaldson, Lufkin & Jennette (DLJ), said an industry source who spoke on condition of anonymity.
Now, instead of the GDB owing money to Banco Popular (the trustee of the hotels bond issue), which in turn pays bondholders, the debt has been transferred to DLJ.
DLJ, owner of the former San Juan Grand Beach Resort & Casino in Isla Verde, was one of a handful of groups that submitted a bid in the prequalification stage to redevelop the former Condado Trio project. The amount DLJ paid the GDB for the debt wasnt disclosed, but the source did say the brokerage firm paid less than the $85 million face value.
Last week the GDB authorized the Tourism Development Fund (TDF), a wholly owned subsidiary of the GDB, to liquidate the bond issue in order to cut its losses short.
The development & construction of the Ritz-Carlton San Juan was partially financed from the proceeds of $85 million in Tourism Revenue Bonds issued through Afica. The payment of the bonds was guaranteed by the TDF, which had made a commitment to advance funds to cover any debt-service reserve-fund deficiency claim under the guarantee. Since August 2000, Green Isle Partners (owners of the Ritz-Carlton San Juan) has failed to make the required debt-service payments on the bonds.
As a result, the TDF had had to advance funds pursuant to its guarantee. Green Isle owed the TDF at least $23 million, including accrued interest, costs, expenses, and attorneys fees.
According to the source, the bonds are being cancelled, which means they are being recalled and each bondholder will be paid the face value of the bond. "The trustee of the hotels Afica bond issue basically notifies all the bondholders and tells them that the government is redeeming their bonds," the source added.
The next step is for DLJ to ask the U.S. Bankruptcy Court in Florida to transfer the ownership rights of the property to it. In return, DLJ will pay off the unsecured creditors and reposition the hotel so that it has a positive cash flow.
"Green Isle can present to the court a package to pay its debt current so there wont be a foreclosure," said the source. "But thats unlikely. If it did happen, Green Isles debt service would have to be paid to DLJ, who is the landlord of the property."
This Caribbean Business article appears courtesy of Casiano Communications.