The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Baha Mar director yesterday branded talk about potential buyers/operators for the $3.5 billion project as “a lot of hype”, arguing that the real issue was the size of the “haircut” that its Chinese lender is prepared to take.

Dionisio D’Aguilar reiterated to Tribune Business that he would be “very surprised” if any financial or resort group offered to pay the China Export-Import Bank 100 per cent of what it is owed, given Baha Mar’s ‘incomplete’ state and the outlay required to complete construction.

Speaking after it was revealed that Sir Sol Kerzner, Atlantis’s developer, was involved in one group seeking to take over Baha Mar’s management and operations, Mr D’Aguilar suggested that the “devil was in the detail”.

He argued that much would depend on whether Sir Sol, and his billionaire investor partner, Andrew Farkas, and rival contenders would be able to strike a deal acceptable to both them and Baha Mar’s $2.45 billion debt financier.

And Mr D’Aguilar said that achieving such an outcome would, in turn, depend on how willing the China Export-Import Bank was to take a ‘write down’ on its debt financing.

“A lot of people are interested in the deal, but I would be very surprised if they paid the bank what the bank is owed on the project,” Mr D’Aguilar told Tribune Business.

“I’m sure there’s going to be a lot of hype about people who are interested, but the question is: What amount is the bank prepared to take a write down on and get out of it?

“It’s going to take time for the bank to come to a conclusion on what’s going to be the write down. There’s going to be a lot of haggling to get to the number the Chinese think they can live with, and the potential purchaser thinks they can make a profit.”

The size of the debt mountain currently loaded on to Baha Mar’s property and real estate assets, coupled with the estimated $600 million required to complete its construction alone, coupled with the development’s incomplete state, will deter any buyers at the moment.

With a likely $3 billion debt load, those groups negotiating with the China Export-Import Bank are all focusing on taking over the property’s management/operations on its behalf. Some are also offering to complete construction.

“I’m sure there are a lot of people interested, but the devil is in the detail,” Mr D’Aguilar reiterated. “You have to come to a deal. These guys are successful because they can come to a deal.

“The question is: What amount of haircut are the Chinese prepared to take to come to a deal?”

The former Baha Mar director added: “I’ve been told there’s no one really interested in buying it unless the bank takes a huge haircut. No Western or European company is prepared to buy that, I’ve been told.

“If the bank is going to sell it, at what price are they going to do so? Are they going to write down part of the loan?”

And he expressed scepticism that Sir Sol and Mr Farkas were close to deal with the China Export-Import Bank, given that so little time had elapsed between the latter’s appointment of its receiver, Deloitte & Touche.

“I find it highly unlikely they’d have gotten to that point and stage so soon after the receivership being announced,” Mr D’Aguilar told Tribune Business.

This newspaper, though, has been told of a possible ‘way out’ for the China Export Import-Bank that could both reduce its debt load and help recover what it is owed, while reducing the price for a potential purchaser.

The key, Tribune Business understands, is the 300 luxury Residences at Baha Mar that were supposed to be sold to prospective real estate buyers.

Around half had been pre-sold, with $16-$17 million in deposits collected, at the time the project was placed into Chapter 11 bankruptcy protection - stalling any further deals.

However, with prices starting at around $2 million, Tribune Business was informed that Baha Mar had originally planned to generate between $500 million to $1 billion in proceeds from those real estate sales.

The developer, in turn, would have used these funds to at least part-pay down the $2.45 billion financing from the China Export-Import Bank.

The bank can now itself pick up such a plan, using the real estate sales proceeds to help repay its financing and reduce the debt to levels that buyers would find manageable in any sale.

Mr D’Aguilar, meanwhile, acknowledged that Sir Sol was “a tried and proven operator and builder of large resorts”, even if he was forced to give up ownership of Atlantis in the debt-for-equity swap with Brookfield Asset Management.