The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday warned it would be setting “a dangerous precedent” if it stepped in to pay Baha Mar’s $7.337 million monthly wage bill, following yesterday’s Supreme Court hearing.

Justice Ian Winder, in failing to grant an Order recognising Baha Mar’s Chapter 11 bankruptcy proceedings in Delaware, effectively prevented the developer - for the moment - from using the $80 million financing put in place by its principal, Sarkis Izmirlian, to pay salaries/benefits due to its staff and those at the Melia.

To prevent around 2,400 Bahamians from suffering economic hardship, the Government yesterday offered to the Baha Mar staff salaries due for July via the Hotel Corporation.

It was assisted in this endeavour by Justice Winder, who ordered that Baha Mar provide the Government with the necessary information so it could pay the developer’s staff.

But Branville McCartney, the Democratic National Alliance’s leader, warned the Government that it was “opening up a can of worms” through its offer to pay the Baha Mar salaries.

Suggesting that it was “a very, very desperate” move on the Christie administration’s part, Mr McCartney said it paved the way for other Bahamian workers, whose employers were unable to pay them, to demand that the Government fill the breach and pay their salaries.

Allyson Maynard-Gibson, the attorney general, gave no indication of whether the Government would cover Baha Mar staff salaries beyond the July payment when she addressed the media yesterday.

Mr McCartney, though, said the Government’s tight fiscal position meant it “cannot sustain” such multi-million dollar payments for any length of time.

And the Hotel Corporation, through which the salaries will be paid, was given just a $1.069 million budget for the 2015-2016 fiscal year - a sum well short of what is required to pay even the $4.4 million in Baha Mar staff wages and benefits that were due prior to the Chapter 11 filing.

The Christie administration’s plan to pay the salaries through the Hotel Corporation is also likely to evoke memories of the disastrous era when it, and the Government, owned a nationalised hotel industry (including the Melia) that represented a huge drain on the Public Treasury.

Mr McCartney described the Government’s offer to pay Baha Mar wages as “a band aid”, a thought that was echoed by the Opposition’s deputy leader, K P Turnquest.

Demanding that the Government provide further details on the scope of its Baha Mar payroll intervention, Mr Turnquest acknowledged that “we all have a Robin Hood complex” when it comes to the plight of the developer’s employees.

Yet he warned that the salary payments needed to be made as part of a wider plan to resolve Baha Mar’s woes, and open the $3.5 billion project for the benefit of all Bahamians.

Mr McCartney, meanwhile, blasted the Government’s salary move, telling Tribune Business: “It is a dangerous precedent, and I will tell you why.

“Although we certainly want to see the 2,000-plus persons employed, they are employed by a private entity.”

He questioned why the Government had not made the same offer to Baha Mar when it laid-off around 350 former Wyndham employees, in two tranches, over the past two years.

“If the Government is going to take this road, what about the 140 people about to be laid-off at BTC, a company supposedly owned by the Government,” the DNA leader added. “Are they going to pay their salaries?

“It’s a very dangerous precedent, and a sign of desperation by the Government. What about the former City Markets workers? What about CLICO? It’s a very, very desperate move by the Government, and opens up a very large can of worms.

“What about persons in the banks, in the private sector and other businesses that have lost their jobs?”

A recent example is the Solomon’s Mines luxury goods retail chain, where staff complained they had not been paid for months before all the stores closed down. There was no sign then that the Government would intervene like it plans on doing on behalf of Baha Mar’s staff.

“That can only be a band aid,” Mr McCartney told Tribune Business of the Government’s plan. “There’s no way that can be sustained. We are a broke country.

“Wherever is that money coming from? Is it Urban Renewal, where they put in $20 million? That cannot be sustained, and is a bad precedent.

“Don’t get me wrong. I want to see the 2,000 persons employed, I want to see them making money, but the Government has to be very careful, as this is the Bahamian people’s money you’re dealing with.

“If you’re going to do this for one group of people employed with one private entity, it opens up a huge can of worms as to why you will not do it elsewhere.”

Backing Mr McCartney’s “dangerous precedent” concerns, Mr Turnquest said the Government needed to provide a better understanding of the “scope” of its Baha Mar payment plans.

He questioned whether the funds would come from the $21 million previously offered to Baha Mar by the Government, as part of its share of the West Bay Street re-routing costs, which the Christie administration had intended to be used for paying the developer’s staff.

Tribune Business previously revealed that this use had been blocked by Baha Mar’s main lender, the China Export-Import Bank.

Mr Turnquest said that if the Government was not intending to use that ‘roads’ money, there were immediate questions as to the source, since it had not been provided for in the 2015-2016 Budget.

“Setting this precedent of agreeing to pick up the payroll bill for any private entity, without any set limits, is something we have to be concerned about,” the FNM deputy leader said.

The Government has conducted similar intervention before, making the severance payments on behalf of former Royal Oasis staff, but Mr Turnquest said that involved “a finite number” of people.

He added: “In this particular circumstance, if they’re paying the salaries, is that an open-ended thing? We need to know what the terms are.

“We need to understand what is being offered here. Is this additional largesse at the expense of the Bahamian people. The question here is what are the terms, and what is the end game?

“I don’t know if we can take the position of paying the salaries without knowing how long we have to pay for, and how the taxpayer is going to be compensated for that.”

Acknowledging the difficult position Baha Mar employees were in, Mr Turnquest added: “We all have a Robin Hood complex. We all want to save the poor, but given our tenuous financial situation we have to put forward a well thought-out plan to resolve this in furtherance of a defined, achievable objective that is going to be recouped.

While the Government suggested it would have to cover salaries for 2,400 persons, Tribune Business calculations suggest it is a little more than that.

For Baha Mar’s filings in the Delaware Bankruptcy Court show that it wanted approval to continue paying its 1,002 Melia staff, who are also caught up in the Chapter 11 filing.

Combined with Baha Mar’s 2,593 staff, and the Government may find itself having to pay funds for almost 3,600 persons in the Bahamas.

Baha Mar’s $6 million monthly wage bill, and the $1.337 million at the Melia, mean the Government will likely have to stump up $7.337 million to ensure all staff are compensated.