The outline of how an offer might be formulated was presented to the 1,100 members of the Harlequin Investor Group (HIG) in an emailed notice sent on Monday by Regulatory Legal Solicitors, a UK law firm which represents individuals with a stake in Harlequin Property. It was described as being in response to a request, on Sunday, for an offer from HIG by Harlequin chairman David Ames.
Under the proposed scenario, investor interests would be held in an investor trust, that "100% owns an operating company", while a managed wind-down of the Harlequin business was achieved.
Where this structure would be situated would depend on the tax and legal advice the group received.
The HIG statement rejects a Harlequin proposal currently on the table, whereby a London-based company called Eleven Capital would be engaged to oversee the company’s on-going development and operations, noting that it calls for investors to put up more money on top of the £400m they have already invested: "HIG do not see this being supported."
No one from Regulatory Legal was immediately available for comment on Tuesday.
Harlequin: ‘overwhelming support’
In a statement in response to the HIG outline for making an offer, Harlequin said it was "currently undertaking a restructuring process, and has retained experts to assist with this".
It said it remained "focused on the best representation of its investor base, from whom it appreciates overwhelming support".
With respect to the Eleven Capital plan, Harlequin noted that that company "is talking to a number of potential lenders and critically assessing their ability to provide suitable financing. As with any potential lender or institution, no commercially sensitive information would be released until that potential lender satisfies a number of prerequisites.
"Harlequin is aware of [a Regulatory Legal-led] approach [that has been] made to Eleven Capital, [and] understands is being considered, along with other financing options in accordance with standard corporate governance procedures."
‘Outline’ for an offer
The HIG outline of how an offer might be put together was the latest in a series of moves by investors and those representing them, and by the property company, which, as reported, went into administration in April.
Many investors borrowed money and tapped into retirement savings in order to invest in the Harlequin properties, located mainly in the Caribbean. According to published reports, only around 300 out of the envisioned 6,000 properties have thus far been built, prompting many investors to request their money back.
With the company now in administration, investors are in a wait-and-see mode as various court cases progress, in courts in Ireland and the UK, and as representatives for both sides attempt to find a solution.
Other points contained in the Harlequin Investor Group outline:
- HIG would seek to appoint an operating company to run those Harlequin resorts that are currently viable. "There are some very knowledgeable resort operating companies who we feel would be interested in this matter", HIG says
- Any deal would not involve payments to Ames, "his family or his entourage": "We do not see any investor support for a deal where the Ames family are rewarded for the non-delivery of the projects"
‘Not a conman’
The Harlequin Investor Group statement coincided with a published interview on Monday of Ames by a London-based financial publication, in which Ames "vehemently denies claims that he is a ‘conman’” and is quoted as saying that he "believes there is only a select group of investors that no longer support him and that the vast majority do".
“I feel really upset as I know I haven’t done anything wrong and that’s what really frustrates me against these people," Ames added. "We have spent so much time on fire-fighting all these problems and actually it’s very difficult to concentrate on the core business.”
Ames stressed that the Harlequin group, which is currently operating hotels under the Harlequin name, "[doesn’t] have liquidity problems", which he said were limited to the property arm, which "obviously has a liquidity problem because it is in administration".
Trouble started in January
As reported, the trouble for Harlequin started in January, when the Financial Services Authority issued an alert on the company, and on 1 March, contacted Sipp providers, asking them to say whether they have any clients invested in the firm, which it said is not FSA regulated.
Media interested was piqued after the BBC postponed a Panorama episode which was to have included a look at Harlequin, and the producer of the show was first suspended, over bribery allegations, and later resigned.
Two weeks later, the company – again, the UK marketing operation rather than Harlequin Hotels & Resorts – applied to go into administration.