China Eximbank provides $170 million preferential buyer’s credit for the Sam Lord's Castle Hotel Reconstruction Project

Project narrative

On November 25, 2015, the Government of Barbados’ Ministry of Finance and Economic Affairs signed a $170 million (BBD 340,000,000) preferential buyer credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2015) 22 TOTAL NO. (365)] with China Eximbank for the Sam Lord's Castle Hotel Reconstruction Project. The borrowing terms of the PBC (loan) were as follows: a 20-year maturity, a 5-year grace period, an interest rate of 2.5%, a default (penalty) interest rate of 0%, a 0.25% commitment fee, and a 0.25% ($425,000) management fee. The borrower was expected to make semi-annual repayments between January 21, 2022 and January 31, 2037. The borrower was also required under the terms of the loan agreement to deposit foreign currency in an escrow account that is accessible to the lender (China Eximbank). The proceeds of the loan were on-lent from the Government of Barbados’ Ministry of Finance and Economic Affairs to the Barbados Tourism Investment Inc. The ‘end-user’ (Barbados Tourism Investment Inc.) then used the loan proceeds to finance 85% of the total cost of a $200 million commercial contract that it signed with China National Complete Plant Import & Export Corporation (中成进出口股份有限公司巴巴多斯分公司 or COMPLANT) on November 13, 2014. As of March 31, 2022, BBD 241,511,623 had been received by the Government of Barbados from China Eximbank. The loan's (principal) amount outstanding was BBD 68,000,000 as of December 31, 2017, BBD 83,818,262 as of December 31, 2018, BBD 116,222,664 as of December 31, 2019, and BBD 323,647,085 as of December 31, 2022. The purpose of the project is to reconstruct the Wyndham Luxury resort at the Sam Lord's Castle in Saint Phillip's Parish (in Chinese: 山姆罗德酒店). The resort was expected to add 450 rooms to the island's room stock and to employ over 1,000 people. China National Complete Plant Import & Export Corporation is the contractor responsible for project implementation. A formal groundbreaking ceremony took place on November 23, 2015. However, construction did not begin until June 2016. The project was originally expected to take three years to complete. However, project implementation ‘stalled’ in 2019. The COVID-19 pandemic led to additional implementation delays in 2020. In July 2021, COMPLANT brought close to 200 Chinese workers to the project site. However, local contractors expressed concern, pointing out that Barbadian companies were being pushed out in favor of the lower-wage Chinese laborers. One local contractor claimed that COMPLANT was constantly trying to get them to reduce their rates to levels which were not sustainable. The same contractor complained about a shortage of bathroom facilities on the job site — for both the local and Chinese workers. At the time, Stuart Layne, CEO of the Barbados Tourism Investment Inc., said they were still maintaining the 60/40 agreement ratio, with local contractors getting 40 percent of the work at the project site. On June 1, 2018, the Government of Barbados announced a selective default and requested IMF balance of payments support. The timing of the announcement was partly driven by large external debt payments that were due in early June 2018, and the Government of Barbados defaulted on these partly with the aim of preserving foreign exchange reserves. However, the Government of Barbados honored its repayment obligations to China Eximbank under the PBC for the Sam Lord's Castle Hotel Reconstruction Project. As of 2020, Government of Barbados was unable to meet its $30 million counterpart funding contribution to the $200 million project and actively seeking to sell the hotel asset (upon completion of its construction). A Request for Proposals (RFP) for the sale of the property closed at the end of January 2020 and officials from the Government of Barbados subsequently conducted a review to select a suitable buyer.