The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Attorney General yesterday said the Government was resolute that Bahamian contractors “are made whole” for work completed at Baha Mar, amid increasing anxiety over what the project’s newly-announced receivership will mean for local creditors.

Allyson Maynard-Gibson told Tribune Business that the Prime Minister “has made very clear what the Government requires” from whichever party, or parties, take over and complete the $3.5 billion development.

“The Prime Minister, on behalf of the Government, has been very firm on two things,” she said, when asked by Tribune Business whether the Government had obtained a guarantee from the China Export-Import Bank that all Bahamian creditors would be paid 100 per cent of what they are owed.

The bank, which is Baha Mar’s secured creditor via its $2.45 billion mortgage debenture, on Friday obtained Supreme Court approval to appoint the Deloitte & Touche accounting firm as receivers for the troubled project.

Raymond Winder, the firm’s Bahamas managing partner, and two colleagues from Deloitte’s Beijing office, will now effectively replace the joint provisional liquidators as the ‘point men’ - operating on behalf of the China Export-Import Bank - charged with developing a solution for Baha Mar’s construction completion and opening.

Meanwhile, listing the Christie administration’s requirements, Mrs Maynard-Gibson reiterated its "desire to have the project resolved and operational as soon as possible, and second, to be sure those employees at the project are productively engaged and that the Bahamian sub-contractors are made whole”.

According to the Bahamian Contractors Association (BCA), some 120 local construction companies are collectively owed more than $74 million for work on the Baha Mar project - an outstanding receivables bill that could force some companies out of business.

And the China Export-Import Bank’s move to appoint its own receivers has only added to the confusion and uncertainty over whether Bahamian contractors will be paid at all or in part.

Dionisio D’Aguilar, a former Baha Mar director, told Tribune Business he had been contacted by numerous contractors on Friday to ask how this would impact their recovery prospects.

“All of them are calling me to find out what this means for them,” he told Tribune Business. “How could the Government strike a deal where they don’t pay us. What’s happening to all these Bahamian construction companies that have been hurt by this whole affair?”

The primary goal of the receivers and China Export-Import Bank and its receivers will be to ultimately recover what is owed to the latter.

But, with the Baha Mar debt load already equivalent to the sum that sank Kerzner International’s Atlantis ownership, and the Prime Minister estimating that another $600 million is required just to finish the project, it is questionable whether the project will be able to generate a profit.

The likeliest scenario is that Baha Mar will be sold for ‘cents on the dollar’, which would mean that all the proceeds go to the China-Export Import Bank, and other creditors are left with next to nothing.

Tribune Business, meanwhile, understands that the Government knew for more than a week that the China Export-Import Bank appointing its own receiver was a distinct possibility.

The Christie administration is believed to have been unhappy that no party to the Baha Mar dispute was prepared to meet the joint provisional liquidators request for an extra $16.662 million in funding to cover their two months’ worth of costs - a development that it knew would lead to more than 2,000 lay-offs.

The Government, in the days leading up to the October 22 terminations, had made a last-ditch request for developer Sarkis Izmirlian or the Chinese to inject the necessary funding, but this came too late for anyone to act.

However, Tribune Business also understands that Mr Izmirlian made an October 7 offer to provide the necessary interim funding, provided he received collateral and a priority ranking over other creditors in return for his investment.

However, sources familiar with the situation said he never received a reply or counter-offer from the China Export-Import Bank.

Little progress in achieving a resolution to the entrenched Baha Mar dispute was subsequently made, amid suggestions that the Chinese were once again failing to seriously negotiate and engage in meaningful dialogue.

However, contacts close to the China Export-Import Bank indicated it moved to appoint its own receivers after becoming increasingly frustrated that the joint provisional liquidators were failing to adhere to their ‘preserve and maintain’ mandate.

Tribune Business was told that the bank was unhappy that around 1,500 Baha Mar staff were still being paid to ‘sit at home and do nothing’, as this was eroding the project’s remaining assets. And there were concerns over the joint provisional liquidators’ fees and costs.

The team of Ed Rahming, the KRyS Global accountant and partner, and Alix Partners duo, Alastair Beveridge and Nick Cropper, were guarded in their comments following Deloitte’s appointment on Friday.

“Our role now is to work closely with Deloitte as the bank’s appointed receivers with a view to exploring and deciding on the most appropriate strategic option in order to see the resort completed and open for business,” said Mr Beveridge.

The Supreme Court, though, is unlikely to appoint two sets of receivers/liquidators for Baha Mar. Deloitte’s confirmation on Friday effectively means that the provisional liquidation has come to an end, and the Bahamian/UK team are now in transition as they prepare to wind-up their assignment.

The China Export-Import Bank’s action also means that Mr Izmirlian’s role and time as Baha Mar’s developer has come to an end.

K P Turnquest, the FNM deputy leader, told Tribune Business that the China Export-Import Bank had effectively allowed the joint provisional liquidators to ‘do its dirty work for it’ by terminating the 2,000 staff, thus allowing it to inherit a much reduced cost base with no stigma attached.

“The plan is to finish the building it and get it open,” said a source familiar with the China Export-Import Bank’s plans.