By NEIL HARTNELL
Tribune Business Editor
The Democratic National Alliance’s (DNA) leader has effectively urged the Government to exclude the Izmirlians and instead work with the Chinese to save the bankrupt $3.5 billion Baha Mar project by attracting new investors and resort brands.
Branville McCartney called on the Christie administration to “use their power and influence”, and work with the China Export-Import Bank, to prevent the mega resort from becoming embroiled in a protracted legal battle.
The state-owned bank is Baha Mar’s leading creditor via its secured $2.4 billion debt facility, and Mr McCartney said the Government had to recognise “it will have the last say” in determining the project’s fate.
Although not explicitly saying so, the DNA leader appeared to advocate ‘shutting out’ the Izmirlian family from any solution. The family, led by Sarkis Izmirlian, Baha Mar’s chairman and chief executive, has invested approaching $900 million worth of equity into the project since first developing the concept in 2003.
However, Mr McCartney said the Bahamian people and economy could not wait for the developers (the Izmirlians) and their Chinese partners to resolve their differences, especially since their relationship appeared to have irretrievably broken down.
Warning that the two sides would simply “battle, battle, battle” if left to their own devices, the DNA leader suggested that the Government should not yet use permits/approvals needed for the British Colonial Hilton expansion as leverage.
He instead called on the Christie administration to see if progress could be made first in negotiations with the China Export-Import Bank over Baha Mar’s future.
Tribune Business understands that China Construction America has already obtained all the permits and approvals necessary for the British Colonial Hilton project, known as ‘The Pointe’, with work already underway on the 900 space parking garage.
“If we were the Government, we would have looked at something with the mortgagor, the Chinese bank,” Mr McCartney told Tribune Business. “They ultimately, at the end of the day, are the ones who will have the last say.”
The DNA leader’s comments recognise the reality that any Baha Mar solution will likely have to go through the China Export-Import Bank, given its priority position.
This appears to have been noted by the Government, which last week gave every sign of adopting Mr McCartney’s advice in that it appeared to at least have common interests with the Chinese.
Both the Christie administration and the China Export-Import Bank successfully advanced the same legal arguments last week to persuade Supreme Court Justice, Ian Winder, not to recognise Baha Mar’s Chapter 11 bankruptcy protection filing.
This means, for the moment, that none of the reliefs and protections granted by the Delaware Bankruptcy Court have any legal effect in the Bahamas – a situation that leaves Baha Mar exposed.
The Christie administration is furious that it was ‘blindsided’ by a bankruptcy filing it had to learn about from the media, especially since it believed an ‘agreement in principle’ had been reached to resolve the Baha Mar impasse.
It will now be more willing to accommodate the Chinese, who may well be attempting to oust the Izmirlians from Baha Mar. The latter’s Chapter 11 filing was designed to prevent this, and any foreclosure by the China Export-Import Bank, given that it had run out of money.
Mr McCartney argued that the warring factions at Cable Beach could not be left alone to reconcile, and suggested that the Government seek to “re-negotiate” the Baha Mar Heads of Agreement with the Chinese.
“This is not going to turn out good at all, in my view,” the DNA leader said of the current impasse, “and the longer we wait for it to be resolved among the owners, the worse it will become.
“The Government has to do something. To stay silent and leave it to the present partners, it’s going to be a battle, battle, battle.
“They [the Government] have to intervene where they become partners,” Mr McCartney told Tribune Business. “I would not say equity partners, but they’re going to have to be in a position where that property is divided, and go in search of other named hotels for that property. They have to direct the course.
“Re-negotiate the terms of that [Heads of Agreement] proposal. The Government has the power. Don’t tell me you don’t have the power to go in there and re-negotiate. They may have to use strong-arm methods, but for the life of me they’re just sitting there and not using the power and influence the Government would have in that regard.”
Mr McCartney also warned the Government against using the $200 million British Colonial Hilton expansion as leverage before beginning negotiations with the China Export-Import Bank.
Baha Mar’s contractor, China Construction America, owns the downtown Nassau resort and was supposed to complete work at Cable Beach before starting its next project.
However, construction work and site preparation have already begun at the British Colonial Hilton, and several observers have suggested that the necessary permits and approvals for this project be withheld until the Baha Mar dispute was resolved.
However, Mr McCartney said the Government should first try to make progress in negotiations with the Chinese over Baha Mar before exercising this option.
“I would suggest they get the negotiations going first with the Chinese and see how they go, rather than hold-off on any further permits for the Hilton development,” Mr McCartney told Tribune Business.
“I would start negotiations first with the Chinese bank to show the Government is not going to let this Baha Mar property go down the tubes. They’ll [the bank] be out a tremendous amount of money. They need to work with our government.
“This is a business, and they need to divide that property up into different entities, different brands, so it can stimulate the economy and competition in the tourism sector.”