The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian has slammed Baha Mar’s transfer to a special purpose vehicle (SPV), controlled by its Chinese secured creditor, as “an intricate fabrication” designed to mask the failure of the project’s sales process.

The project’s original developer, in an October 24 letter to China Export-Import Bank’s president, Liu Lange, argued that the lack of transparency surrounding the Baha Mar sales process was to blame for failing to attract a buyer.

He added that the Supreme Court’s approval for the bank’s SPV, Perfect Luck Holdings, to purchase Baha Mar was also intended to camouflage the inability of the Deloitte & Touche receivers to find purchasers willing to make the Beijing-owned institution ‘whole’.

Mr Izmirlian’s letter effectively alleges that the ‘sale’ to Perfect Luck is a ‘smoke and mirrors’ transaction, which will allow the China Export-Import Bank to retain control of Baha Mar’s assets while ‘hiding’ any future sale - and associated losses - off its balance sheet.

“It is indeed ‘extraordinary’ that the entire sale to ‘Perfect Luck’ has been an intricate fabrication,” Mr Izmirlian wrote in the letter, which was released for public consumption.

“The fact that the receivers were not able to find an arm’s length buyer has nothing to do with the quality of the asset, and everything to do with a process where bidders were not given information, and were forbidden to meet with stakeholders or to discuss the status of construction with any of the relevant parties.

“The fact that the Bahamian court signed off on the sale does not mean that a comprehensive and inclusive process was followed. It only means that your lawyers were able to craft a story sufficiently plausible for the bank to sell Baha Mar to itself and conduct a further sale of Baha Mar in even more secrecy.”

Mr Izmirlian even hinted that other potential Baha Mar purchasers had questioned the sales process’s “integrity”, and the China Export-Import Bank’s real goals for the project.

“We have been in ongoing communication with many industry experts, operators and interested parties, many who have considered their options for pursuing Baha Mar,” he said.

“They, like us, question the sincerity of the process and the real goal of the appointed receivers. They also recognise the unique experience we bring to this significant project given the many hurdles that lie ahead.”

Tribune Business exclusively revealed the ‘SPV sale’ in the week before Hurricane Matthew hit the Bahamas, as details were contained in a Supreme Court judgment delivered by Justice Ian Winder.

He wrote that the asset transfer to Perfect Luck was vital because the China Export-Import Bank was only willing to invest “hundreds of millions of dollars” in completing Baha Mar if the project was removed from receivership.

Baha Mar’s physical construction completion was deemed essential because the prices offered to acquire the project ‘as is’ were “severely depressed”.

Justice Winder said the sum offered by the SPV was “the best price obtainable under the circumstances”, given that all other bids to acquire Baha Mar were far below the $2.45 billion owed to the China Export-Import Bank.

Although scant on details, due to the earlier decision by the Supreme Court to ‘seal’ the agreement for Baha Mar’s construction completion, Justice Winder’s ruling also divulged that the receivers were unable to reach a deal with the ‘preferred bidder’ in their sales process.

Instead, Baha Mar’s latest ‘proposed purchaser’, whose identity has not been disclosed, emerged from “outside the bidding process” set up by Deloitte & Touche.

Apart from taking aim at these machinations, Mr Izmirlian’s letter said it was “bizarre” that the China Export-Import Bank and its agents has never even acknowledged receipt of his offer to outbid all rivals in purchasing Baha Mar.

“I sent you two weeks ago today a bona fide proposal to buy Baha Mar at a price superior to any offer ‘Perfect Luck’ or China Export-Import Bank has received,” Mr Izmirlian told Mr Lange.

“As part of my offer, I also made clear that this proposal to acquire Baha Mar would result in, among other benefits, all substantiated Bahamian creditors being paid in full and all Baha Mar employees - both Bahamians and expats - being paid the monies they are owed.

“Bizarrely, China Export-Import Bank has not acknowledged receipt of my proposal, nor has anyone associated with either the bank, the receivers, or ‘Perfect Luck’ made contact with us,” he added.

“It makes neither economic sense, nor is it in the best interests for the future of Baha Mar or The Bahamas, that not one of these related parties have engaged with us to discuss our proposal.”

This is despite Prime Minister Perry Christie’s Office urging Mr Izmirlian to ‘engage’ with the bank and ‘Perfect Luck Holdings’ - the very thing Mr Izmirlian is now seeking to do, but without success as the Chinese cold shoulder him.

Playing on the name of the bank’s SPV, Mr Izmirlian added: “At this stage, no one feels lucks: The thousands of Bahamians out of a job, the contractors not paid, the foreign creditors ignored, the shareholder of China Export-Import Bank who is forced to take an enormous write-off on its debt......

“We present the best option to complete the project and affirm the policy success of China Export-Import Bank. Why not at least engage in a serious discussion with us to consider whether there is a pathway forward?”

However, it is clear that the Beijing government, and the two entities at the centre of the Baha Mar saga, the China Export-Import Bank and China Construction America (CCA), the project’s general contractor, have no wish to deal with Mr Izmirlian and are determined to oust him as the developer.

Any deal with Mr Izmirlian would likely require CCA to be removed from the project, a demand that has always been a ‘no go’ for the Chinese, with protection of the contractor’s interests seemingly paramount throughout the past 18-month saga.

Former Bahamian employees have already been paid out, negating much of Mr Izmirlian’s promise to make all local creditors ‘whole’, while the China Export-Import Bank, as a government-owned policy institution, is under no obligation to deal with him or accept a higher offer.

All this means Mr Izmirlian is likely to remain on the outside looking in at the project that was his brainchild.