By NEIL HARTNELL
Tribune Business Editor
Baha Mar has admitted it “does not have sufficient cash” to pay its 2,400 employees due compensation should it have to make them redundant, as its $80 million financing facility has been blocked - at least for the moment - by Government and Chinese opposition.
Patrick Ryan, an attorney for Glinton, Sweeting and O’Brien, the law firm acting for Baha Mar over its Chapter 11 bankruptcy protection filing, confirmed in an affidavit that the $80 million facility arranged by the developer’s principal, Sarkis Izmirlian, was essential to compensate terminated staff.
“The Baha Mar group has approximately 2,000 thousand employees in the Bahamas,” Mr Ryan said. “If the present crisis cannot be resolved very soon, it is highly likely that a high percentage of those employees will have to be made redundant.
“The group intends to continue paying the salaries of all employees and, if a mass lay-off becomes necessary, to pay off all the laid-off workers the compensation provided for in Section 26 of the Employment Act 2001.
“However, the group does not have sufficient cash to make any of those payments. Those payments can only be made if the applicants are able to secure additional financing.”
Mr Izmirlian, via his Granite Ventures Ltd entity, had given an $80 million commitment to provide redundancy funds, and cover all Baha Mar’s working capital needs, during the Chapter 11 proceedings.
However, the consummation and use of such a facility is currently blocked because the Government, and Baha Mar’s Chinese partners, have for the moment blocked recognition of the Delaware Chapter 11 proceedings by the Bahamian Supreme Court.
This means that Delaware’s approval of the $80 million facility has no legal effect here, and Mr Ryan admitted that without it, the Baha Mar companies “may not have sufficient funds to pay amounts due to laid-off workers”.
The Government cited Baha Mar’s inability to pay laid-off staff what they were due in its petition to wind-up Baha Mar and appoint PricewaterhouseCoopers (PwC) as provisional liquidators, suggesting it was “clear” evidence that the developer could not pay its bills and was insolvent.
However, it made no mention of the $80 million facility that Mr Izmirlian had put in place to cover these potential payments, or how its use was being blocked.
The situation also raises the spectre of what happens should Baha Mar make good on its threat, if the dispute over the $3.5 billion project is not resolved, to lay-off more than 2,400 staff and downsize to a 50-strong ‘skeleton’ workforce.
Given that the Government has already stepped in to use taxpayer dollars (funds due to Baha Mar on the roads re-routing) to pay staff salaries, it remains to be seen whether it would do likewise over the redundancy pay.
This is likely to total near $2 million at least, as Baha Mar had already obtained a Delaware court order authorising it to pay $1.861 million in severance monies.
Judge Kevin Carey yesterday authorised Baha Mar to “pay the balance of severance payments”, but he conditioned payment on the use of the $80 million provided by Mr Izmirlian - something the developer cannot do without Supreme Court recognition.
The Delaware court also granted an Order allowing Baha Mar to pay a total of $840,000 to Melia Nassau Beach Resort staff that was due prior to the Chapter 11 filing, and continue to honour the employee benefits programme.
Of that $840,000, some $275,000 will be applied to both the staff bonus programme and vacation obligations. A further $150,000 will go to employee benefits, and $140,000 to cover payroll.