Yacht Tours sues MTDC for US$55 million

Friday, 19 June 2009 16:11

Tourism company Yacht Tours is suing the Maldives Tourism Development Corporation (MTDC) for US$55 million in damages due to the dispute over Herethera (Handhufushi) Resort. Speaking to Minivan News today, Dhiyana Saeed, lawyer for Yacht Tours, said US$10 million was for the losses incurred since the start of the legal dispute. The company claimed the dispute led to a low occupancy level and earlier this month, tour operators announced they would no longer send tourists to the resort. The remainder, said Dhiyana, was for the projected losses, as Yacht Tours entered into a 20-year rental agreement with MTDC last year. “A court ruled that MTDC was in breach of the agreement, therefore that entitles us to damages,” said Dhiyana.

The two companies have been in and out of the courts since January after Yacht Tours refused to pay MTDC rent, claiming the public-owned corporation failed to fulfill its contractual obligation to build a channel between Herethera and neighbouring inhabited island, Hulhudhoo. At the time, MTDC asked Yacht Tours to pay the outstanding rent and hand back the resort.

Yacht Tours responded by filing a claim for US$67 million in damages, which was later reduced to US$45 million. While the court ruled against them, saying they were unable to calculate the proposed projected loss, Dhiyana said Yacht Tours now had two reports to back up their claim: an audit from financial advisory company Ernst & Young and a second from a management consultancy firm, which conducted a financial forecast. “We have asked for a declaration that we don’t have to pay rent or liquidation,” said former attorney general Dhiyana. MTDC Managing Director Mohamed Mihad said the US$55 million “simply” did not make sense to him. “They started with US$67 million, it came down to US$45 million and now another figure has come.” MTDC has three cases lodged against Yacht Tours.

The first is to recover unpaid rent, the second to evict the company from the resort and the third is to recoup money paid by MTDC for insurance and stock. Mihad said MTDC handed over the resort to Yacht Tours last summer with around US$800,000 worth of stock, which was never repaid. Further, insurance for the resort had been paid for by MTDC ever since the takeover. The last court verdict issued in April ordered Yacht Tours to pay the outstanding rent of US$8 million and gave MTDC permission to retrieve the US$10 million bank guarantee. But a second ruling ordered Habib bank, the holder of the guarantee, to withhold the money until further notice.

The MTDC was established as a public enterprise with 55 per cent of its shares sold to the public to encourage the redistribution of tourist profits. The resort, which opened in 2007, was intended to boost the local economy in Addu atoll, considered by many to have been economically neglected by the government. But, hundreds of the local employees have been dismissed due to the resort’s low occupancy levels. The ongoing dispute led to government ministers holding a press conference this month, announcing plans to step in as mediators. Speaking to Minivan News earlier this month, Yacht Tours Chairman Abdulla Jabir said he was willing to settle out of court. Asked whether this was an option, Mihad said he heard Jabir had publicly announced he would be willing to hand over the resort if the bank guarantee was returned. “The board is considering it and we will give a counter offer. It’s not an easy decision to make,” said Mihad.

Related posts:

MTDC urges the Court to acquire the rent despite the court proceedings
MTDC files lawsuit demanding return of Herathera Resort
Yacht Tours to layoff Herathera Resort staff
Yacht Tours dismisses reports that new MTDC director is their employee
Six Days To Surrender Handhufushi: MTDC
MTDC terminates Herethere contract with Yacht Tours
Hulhudhoo Islanders Protest Against Yacht Tours
Handhufushi staff begin strike to protest against delay in getting paid



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