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The Honolulu Advertiser

Posted on: Thursday, March 13, 2003

DFS says talks with governor fruitless

By Mike Leidemann
Advertiser Transportation Writer

Airport duty-free retail contractor DFS-Hawai'i said that unless it receives legislative help, it could cease operations here, but the state still insists the company should pay $40 million-plus in overdue rent before it discusses new relief, lawmakers were told yesterday.

DFS officials met with Gov. Linda Lingle for the first time this week, but "absolutely no progress was made," said Sharon Weiner, a DFS group vice president.

"Without relief, we won't be here," Weiner said. "We'll cease operations. The technical term is we're insolvent at this time."

The company is being kept afloat by loans from its part-owner LVMH Moet Hennesy Louis Vuitton, she said.

More than half of all airport revenue comes from the concessionaires there, many of whom have suffered financial setbacks since the Sept. 11 attacks and subsequent economic downturn.

After the attack, the state granted temporary rental relief but that ended last April. Since that time, DFS and others have fallen behind on payments.

Despite opposition from Lingle and the Transportation Department, lawmakers are considering legislation that would give the companies extended breaks on their payments schedules, many of which were negotiated in five-year contracts signed just before Sept. 11, 2001. The Legislature approved a similar bill last year, but it was vetoed by then-Gov. Ben Cayetano.

At least eight of the major concessionaires at the airport are current on their payments and "it's very difficult to understand how other concessionaires need additional relief to survive," Transportation Director Rod Haraga said.

The state still insists DFS and others must become current on their payments before negotiations on additional relief are opened, Haraga said, and "if they won't do that, we need to take a step back and develop a new strategy to deal with the situation."

DFS, which has 1,200 full- and part-time workers in Hawai'i, says it can't afford to pay the minimum rent of about $60 million a year.

News reports last week that the company repaid $100 million in loans to LVMH last year even while it fell further behind on its state payments were a "malicious act designed to discredit my company," Weiner said.

"This was an outrageous and mean-spirited attempt to torpedo the concessionaires' attempt at passing the bill before you," Weiner told members of the House Transportation Committee.

"If we didn't at least make a partial payment (to LVMH), we would be out of business in Hawai'i and the Mainland."

DFS still owes $350 million to LVMH and has total debts of more than $500 million, according to Weiner.

The Transportation Committee yesterday deferred action on the relief bill until next week to give both sides more time to work out an agreement, committee chairman Joe Souki said.

"There's got to be some movement," Souki said.

"The alternative is not so hot."