- · A deep gap of more than 150 million euros separates the two fronts despite the leaks of recent weeks to the contrary.
- · Investors also rejected the banks’ new proposal for financing terms.
- · The fateful role of Greek-American Michael Karloutsos.
By Data Journalists
The most famous poker hand, the royal flush, is unbeatable. It consists of Ace, King, Queen, Jack, and Ten of the same suit (spades, hearts, etc.). Only there is one small detail. It may be the strongest combination of cards but it is also the rarest. Neither this, nor any other winning combination of cards has yet been drawn by the Casino investment in Hellinikon, which remains in the air causing headaches not only to investors, namely Hard Rock and GEK-TERNA, but also to the Government, which is losing the advantage in a “game” and in an investment that has been a flagship of its investment success story narrative.
The clouds, as Data Journalists have already revealed since the middle of the summer, are numerous above the investment, causing a headache for the Government, which has assigned high-ranking officials of Maximos Mansion to manage the crisis and the Minister of Development Kostas Skrekas to lead the negotiations between the Banks and the investors.
But as of this writing, there has been no convergence between the two sides, despite the leaks to the contrary that have been circulating over the last two weeks. In the last communication that investors had with the banks on Wednesday evening, the gap between the two fronts was confirmed. Investors did not accept the banks’ new proposal on financing terms and a new round of negotiations is underway. And all this took place shortly before the TIF and the speech of Kyriakos Mitsotakis who, apart from the package of measures to deal with the disasters in Rhodes, Evros, and Thessaly, would have liked to present positive investment news, in order to smooth the very negative climate and send a message to the markets.
According to the information available to Data Journalists, the discrepancies in the funding plan can be found in several areas. “There are issues in the terms and conditions, especially in the issue of the guarantee required from banks for the construction costs. They are asking for 10% on the €1.4 billion investment,” sources tell Data Journalists. That is, the banks are asking investors to give a guarantee for overruns on the construction part. But more importantly, according to the same sources, there are covenants in other loans that prohibit investors from giving guarantees.
At the same time, the possibility remains open that part of the investment could be covered with €350-450 million from the Recovery Fund. The Recovery Fund was mentioned during the regular general meeting of GEK Terna by its CEO Mr. Peristeris, who, without mentioning the investment in the Casino in Hellinikon, had said that “the group will seek to secure loan capital for selected projects and investments”. In addition to the Casino in Hellinikon, the GEK TERNA group has an investment program of €10 billion, and this year alone it will invest around €2 billion, up from €350 million in 2022.
At the same time, the possibility remains open that part of the investment could be covered with €350-450 million from the Recovery Fund. The Recovery Fund was mentioned during the regular general meeting of GEK Terna by its CEO Mr. G. Peristeris, who, without mentioning the investment in the Casino in Hellinikon, had said that “the group will seek to secure loan capital for selected projects and investments”. In addition to the Casino in Hellinikon, the GEK TERNA group has an investment program of €10 billion, and this year alone it will invest around €2 billion, up from €350 million in 2022.
From this investment, the Greek State expects revenues of more than €6 billion over 30 years. In particular, the fiscal benefit is estimated to exceed EUR 200 million per year for the next 30 years. EUR 3 billion is estimated to come from the taxation of the Casino’s gross revenues, EUR 1.1 billion from social security contributions, EUR 800 million from income tax, EUR 500 million from VAT, and EUR 600 million in municipal fees. Lamda Development, as the concessionaire of the land, also expects high revenues.
Data Journalists have published an extensive report on the problems with the banks and the fatal role of Michael Karloutsos since July 21.
The son of the Greek Orthodox priest Alex Karloutsos, Michael Karloutsos, allegedly acted as an intermediary between Hard Rock and the Greek side for the creation of the project. Sources tell Data Journalists that M. Karloutsos has displeased both sides, as he has acted as a “broken” phone between the investors and the banks.
Michalis Karloutsos, is the son of the well-known Greek-American expatriate, “Fr. Alex” Karloutsos, who served for many years as an active member of the Archdiocese of America, having excellent ties with the Ecumenical Patriarchate and over time with the administrations in the White House. However, he is best known for his friendship with the family of current US President Joe Biden.
Despite the high level of connections bequeathed to him by his father, Michael Karloutsos took a position as deputy director of protocol in Donald Trump’s administration for a few months and then stayed out of the market for some time.
Until Hard Rock commissioned him to carry out the “Casino in Hellinikon” project with the results we know today. For the government of K. Mitsotakis, Michalis Karloutsos, due to his close relations with the SYRIZA government, is considered a “hot-button issue”. It should be noted that we have already attempted to contact M. Karloutsos since our two previous investigations on the matter, but he did not return our calls nor did he reply to the messages we left him.
Four years of longing
The Casino’s investment in Hellinikon is not the first time it has faced obstacles. Since February 2019, i.e., since the International Bidding Tender for the Concession of the Casino Business License for a wide range of activities in the Metropolitan City of Hellinikon – Agios Kosmas, with an initial deadline for submission of bids on April 22, 2019, there have been several serious issues.
Finally, the Tender was held on October 13, 2020, by decision of the ESPD, “INSPIRE ATHENS” consisting of the companies “M.G.E. Hellinikon B.V.”, “Mohegan Gaming Advisors, LLC” and GEK TERNA was appointed as the Provisional Contractor. The financial offer submitted by the Mohegan – GEK Terna consortium was EUR 150 million. This is well above the minimum price set by the tender documents at EUR 30 million.
In the “INSPIRE Athens” consortium, which was selected by the ESPD in February 2021 as the preferred investor, leaving Hard Rock out of the process, Mohegan Gaming and Entertainment (MGE) controlled 65% and GEK Terna 35%. The GEK Terna-Mohegan investment plan for the IRC was valued at EUR 1.1 billion (EUR 150 million for the casino license and EUR 950 million for the technical bid for the construction of the complex).
The investment includes, among other things, a 5-star hotel on an area of 120,000 sqm with 3,500 beds, a 24,000 sqm conference and exhibition center, a 10,000-seat sports-conference arena, and a 15,000 sqm casino area. Mohegan CEO Ray Pineault stated, speaking at the Delphi Economic Forum, that the IRC investment would be completed between 2025-2026.
Hard Rock attempted legal action to reverse the result, and its CEO Jim Allen said at the time: “The process was unfair from the beginning. Our bid was better than that of the Mohegan-GEK TERNA partnership, but the committee never evaluated the financial terms.”
Among other things, it appealed to the Council of State in the case of the Casino license in Hellinikon after being excluded from the tender for the award of the casino license and the Integrated Resort Casino (IRC). The Council of State rejected its appeal.
The Plenary Session of the CoE, in its decisions No 1819 and 1820/2020, ruled that the company “SHRE/SHRILLC” (Hard Rock) was rightly excluded from the initial stage of the contested tender, in accordance with the legislation on the conduct of public tenders.
But Mohegan Gaming & Entertainment’s miracle lasted “three days” after throwing in the white towel before the ink of the deal was well and truly dry. But the white towel that Mohegan Gaming & Entertainment finally threw, by backing out as leader of the consortium to walk away from the whole project altogether, paved the way for Hard Rock to take on the role of the “white knight”. The American group agreed to replace Mohegan by acquiring 51% of Inspire Athens, while GEK Terna retained 49%.
The procedures for the transfer of 51% of the shares of IRC S.A. to Hard Rock International were completed last May. The cooperation between Hard Rock International (51%) and GEK TERNA Group (49%) concerns the 30-year concession for the construction and operation of the Integrated Tourist Complex with Casino in Hellinikon. All construction works will be carried out by TERNA S.A., a 100% subsidiary of GEK TERNA Group.
It is noted that the concession contract between the Greek State, and the Athens IRC (MGGR LLC, MGE HELLINIKON B.V. and GEK TERNA S.A. Holdings, Real Estate, Construction), for the license for the operation of a Casino Enterprise of a wide range of activities in the Metropolitan City of Hellinikon – Agios Kosmas and the works for the construction of a hotel, a conference and exhibition center and a public gathering place for sports or cultural events, was signed in June 2022.