With a sort of morbid fascination, I have been revisiting the shipwreck that was Hotels & Resorts Ltd., the above-ground financial counterpart of the Stavronikita, at the end of 2001.

Yes, dear readers, I know this is almost December 2007, so you may wonder, what is the point? Well, there really isn’t any, except that the 2001 accounts were only recently laid in Parliament along with the remainder of the company’s annual reports from 1997 to 2001, so I thought it would be “interesting” to recap the disastrous position GEMS had found itself in by then.

Writing in the notes to the financial statement for 2001, KPMG noted that “the company incurred a loss for the year ended December 31, 2001 of $22 million and had accumulated a deficit of $60 million at the year-end date. Also at that date, current liabilities exceeded current assets by $51 million. This raises substantial doubt that the company will be able to continue as a going concern without the continued financial support of its shareholders.”

$51 million? How did that happen? Well, current assets, which were made up of cash in hand, as well as trade, VAT and other receivables, prepaid expenses and inventory, totalled a paltry $4.1 million, while current liabilities, which were made up of the company’s bank overdraft, accounts payable and accrued expenses, a sum due to CRL Ltd., interest bearing loans and interest payable, totalled $55.6 million. Subtract one from the other.

Therefore, it wasn’t surprising that government had to take something like $150 million from the Treasury to clean up the red ink flowing from HRL like water over Niagara Falls. Of course, the sale of a majority stake in BNB to Republic for a similar amount put the money back into the Treasury, so it all got tidied up very nicely. Except we sold the majority stake in BNB and had nothing tangible to show for it. Ah well, easy come, easy go.

What can we say positive about GEMS? Well, in the five years it took to build up that $60 million deficit, the company had earned gross revenues (you know, from things like room rentals), of $42 million, and it had paid $29 million in interest on its loans. However, the accounts show that in 2001 the government lent HRL another almost $10 million to allow it to pay interest on its loans.

Another fun fact about GEMS: the shares at the end of 2001 were worth less than zero, in fact, Total Shareholders’ Equity is put at MINUS $36 million. Ouch. And those loans requiring so much interest? A mere $77 million, all but $15 million of it owed to - which bank? Yep, you guessed it, the good old BNB. So you see, if you owe the bank and can’t pay, all you have to do is sell the same bank in order to pay it off. Except for one little thing: You would have to own the bank in the first place. Again, it all worked out so tidily in the end.

Except that GEMS is still out there, trading (at least its version of trading). Question: Is it still creating minuses on its balance sheet for its principal shareholder, the government of Barbados? How can we have sympathy for the government in this case, when it single-mindedly persevered in digging one of the biggest financial holes it has ever dug (and that is probably saying a lot) with this ill-begotten, foolish project? Remember, this was a project that began as one thing and inexplicably turned into another: GEMS was first envisaged as a sort of co-op to help small hoteliers on the South Coast pool their resources in administration, overhead and marketing. But when the deeply-indebted hoteliers objected to being corralled, instead of letting them sink into the mire of repossession and bankruptcy, the Owen Arthur administration thought it would be much better to dig a giant hole in which to throw taxpayers’ money. The only project rivalling GEMS for non-sensical spending by the administration is probably Greenland.

Finally, a little snippet on HRL which I must confess I didn’t know about. I must have missed it in the paper, where it was probably front page news. At note 13 of the 2001 notes to the financial statement, it is stated that “The company’s former hotel manager, Commonwealth Hospitality Ltd. (CHL) has made a claim for an aggregate sum of US$13,583,521 which is the subject of arbitration proceedings.” CHL suing for nearly US$14 million? Why? The note goes on to say that it was for “wrongful termination of the management agreement between the company and CHL.” However, it adds that HRL believed it was “entitled to terminate the management agreement” and therefore owed CHL nothing. Also, without giving the figures, the note adds that “Various other claims have been made against the company.”

I look forward to the day when we will see the next chapter in this intriguing story so that the following questions can be answered: Did GEMS finally turn a profit? Did CHL get any money out of it? Is Eastry House sold, refurbished or still in ruins? Was Silver Sands Resort sold off at a profit? How are Timeout at the Gap and the Savannah doing financially? What are the financial projections for those condos being built opposite Timeout, and are they part of the new HRL strategy or a spin-off? Is HRL still a financial drain on the Barbadian taxpayer, despite all the dollars sunk into that massive money pit? Well, it’s only 2007, so I’m looking to see the financials for 2001-2007 sometime in the future, maybe 2015. I hope I’m still around to hear the rest of the story.