WASHINGTON (Reuters) - The hotel division of Wyndham Worldwide Corp says European governments have issued exemptions from anti-Gaddafi sanctions so that it can keep operating a group of hotels it runs jointly with a firm partly owned by a Libyan government entity.
Wyndham is one of the first publicly traded American companies to be forced to address the punitive measures aimed at Libyan leader Muammar Gaddafi, his family and his government.
The Wyndham Hotel Group is an equity partner in a hotel management group, CHI Ltd, with International Hotel Investments, PLC (IHI), a company publicly traded in Malta. A source familiar with the ownership of IHI said that the Libyan Foreign Investment Company (LFICO), also known as the Libyan Arab Foreign Investment Company (LAFICO), owns 35 percent of
Under an order issued by the European Union last week, LAFICO was one of five entities against whom the EU imposed “restrictive measures” because the entities were under control of Gaddafi and his family, and were a potential source of funding for his regime.
As a consequence of the EU order against LAFICO, the Libyan entity’s ownership stakes in several prominent European businesses — including Fiat SpA, Italian soccer club Juventus and Financial Times publisher Pearson — have been frozen and cannot be sold.
Nor can LAFICO receive any income or dividends from the operations of any of these businesses. The source close to IHI said that similar restrictions apply to LAFICO’s stake in IHI, and, by extension, to the company’s CHI joint venture with Wyndham.
Spokespeople for both IHI and Wyndham said that, because of special authorizations granted by European governments, sanctions against LAFICO are not affecting routine business at hotels operated by their joint venture.
“European governments have issued authorizations to allow CHI Limited to continue business in Europe,” said Evy Apostolatos, public relations director for the Parsippany, N.J.-based Wyndham Hotel Group. Another Wyndham official said she could not immediately name the governments concerned.
“It is Wyndham’s policy to comply with all applicable laws and regulations,” Apostolatos added. “We continue to monitor the Libyan situation, any and all potential applicable sanctions related to Libya and the potential implication for our business.”
She confirmed that Wyndham is a minority joint venture partner in CHI and that CHI manages Corinthia, Wyndham and Ramada Plaza hotels in Europe, the Middle East and Africa. Public securities filings by IHI in Malta indicate Wyndham’s equity ownership stake in the CHI joint venture is 30 percent.
In an e-mail to Reuters, a spokesman for IHI said: “The asset freezing orders announced by national governments and the EU are having no effect on the day-to-day operations of any hotels in the IHI group. It is business as usual.”
Sandro Baluci of Maltese stockbrokers Curmi & Partners Ltd, said that as he understood EU and government actions, anti-Gaddafi sanctions would stop profits or other cash payments from going from hotel co-owners and operators to Libyan entities named in the sanctions orders.
He also said that because IHI is one of the biggest bond issuers in Malta, the actions against Libyan assets would have an impact on the island nation’s economy.
A 2006 U.S. State Department cable obtained by WikiLeaks and made available to Reuters by a third party describes LFICO/LAFICO as Libya’s largest government-owned investment company, operating under the auspices of something called the “General People’s Committee” which has served as the Gaddafi government’s Ministry of Trade and Economy
The cable says that a senior Libyan financial operative told American diplomats that once the U.S. began lifting economic sanctions on Libya following Gaddafi’s decision to give up his nuclear program, LFICO’s “most significant post sanctions investment in the US” was the 2006 hotel deal. In that deal, the cable said, the Malta-based Corinthia hotel group announced an agreement with the Wyndham Hotel Group “to jointly manage 15 existing Corinthia hotels under the Wyndham and Ramada brands” in Europe, the Middle East and Africa.
Possibly fearing that inflexible application of anti-Gaddafi sanctions could damage successful businesses, European authorities and affected companies are moving cautiously to enforce them.
According to the source close to IHI, that company in collaboration with Wyndham through their joint venture, is scheduled to open an ultra-luxurious new hotel next month in a historic building near London’s Trafalgar Square.
The source said that IHI had sought and obtained clearance from the British Government to open the hotel despite unilateral sanctions Britain has imposed, in tandem with the EU, on LAFICO and other alleged Gaddafi financial interests.
The State Department cable said that, as of 2006, LFICO’s holdings in Italy included 2 percent of Fiat, 15 percent of the Tamoil energy company, and 7.5 percent of Juventus, where a soccer-playing Gaddafi son, Saadi, once sat on the board. The cable said LFICO also had over $500 million worth of investments in Britain.