YESTERDAY, Mr Justice Ian Winder granted a three-week extension to government’s winding up petition to settle the future of Baha Mar, the much anticipated resort that closed before it could open.
The hearing, first set for November 2 will now be heard on November 25. Work at the $3.5 billion resort, which was nearing completion, stopped abruptly earlier this year when China State Construction’s US subsidiary walked off the job, allegedly due to not having been paid for months.
In explaining the impasse, which forced developer Sarkis Izmirlian in June to seek Chapter 11 bankruptcy protection for his ”dream” in the Delaware court, he complained that the general contractor repeatedly missed construction deadlines. “This,” he explained, “has caused both sizeable delay costs and forced the resort to postpone its opening”— in fact Baha Mar missed two, if not three opening dates. In the Chapter 11 filing, Mr Izmirlian also accused his construction partner of inflating invoices for completed work.
“This,” said Mr Izmirlian, in explaining why he was forced into Chapter 11 to save the resort, its staff and creditors, “has caused both sizeable delay costs and forced the resort to postpone its opening. Unable to open, the resort has been left without a sufficient source of revenue to continue our existing business.”
At the time, a foreign commentator observed that China State Construction had rarely encountered such public allegations of mismanagement or such public scrutiny. “No doubt,” said Derek Scissors, an economist and resident scholar for American Enterprise Institute, who tracks China’s overseas construction, “they will have questions to answer on future jobs that they didn’t before.”
However, David Wang, an executive director of China Construction America’s (CCA) parent company, was confident that it would have no affect on future business anywhere in the world. “We are confident,” he said, “that the government of The Bahamas will vouch for our impeccable behaviour and professionalism during the entirety of our engagement at Baha Mar.”
In fact, that is exactly what Deputy Prime Minister “Brave” Davis did when shortly afterwards — with Baha Mar facing difficulty in Nassau – he went to Panama to participate in the ribbon cutting for the opening of CCA’s regional headquarters there. Mr Davis was effusive in his praise.
“For The Bahamas,” he said, “we are grateful for the contribution of CCA in our efforts to improve our economy through foreign direct investment, the creation of jobs, and the provision of training opportunities.” As the financier, investor and builder of the Baha Mar project, he said, CCA helped create thousands of jobs for the Bahamian people and hundreds of millions of dollars in revenue for local businesses.
“Finances, dedication, network capability, and other resources are major assets of CCA; and these assets accomplish the seemingly impossible,” said our Deputy Prime Minister.
It certainly has accomplished the “seemingly impossible” – more than 2,000 Bahamians made redundant last week. What tragic irony!
After appearing before Mr Justice Winder yesterday in connection with the postponement of the winding-up petition, lawyer Wayne Munroe remarked to reporters that Mr Izmirlian had better “put up or shut up” if he is serious about getting the resort completed. This cheap comment will have as much affect on Mr Izmirlian as did Prime Minister Christie’s remark in July that he had “grave concern for the state of Mr Izmirlian’s mind.” Of course, Foreign Affairs and Immigration Minister Fred Mitchell, loath to miss the spotlight, was quick to suggest that Mr Izmirlian’s permanent residence status should be revoked. Labour Minister Shane Gibson, also not one to be elbowed from centre stage, had his own solution – from henceforth all developers should have psychological evaluation.
Anyone looking in from the outside would probably recommend psychological testing for the lot of them.
In a speech to the nation in July, Mr Christie made it clear “that the completion of the Baha Mar resort is a matter of the utmost national importance. Baha Mar must open! Whilst we certainly remain open to further discussions, my Government has taken the decision to seek to bring the Baha Mar development project under the control and supervision of the Bahamian Supreme Court, right here in The Bahamas,” he said.
In our opinion, this was a major mistake. Contrary to what he has told the public, Bahamian courts do not have the flexibility of US bankruptcy courts to protect a business venture in trouble.
Our government chose “sovereignty” over a system of justice if allowed to take its natural course would have had Baha Mar operating as a successful resort today.
This month, the Prime Minister said that “whatever levels of pessimism that exist, I choose to believe that we are going to have an outcome that will result in early construction resumption and early opening of that resort”.
We hope he is right for the sake of this country and its people.
However, there is much speculation about the future of Baha Mar. And so, like many others, we shall also play the guessing game. In our opinion, Baha Mar will not be opened before November 2016 at the earliest.
As we move closer to receivership the Chinese Export-Import Bank, probably understands that a liquidator can only auction off the assets to the highest bidder. It will probably move to have a Receiver replace the liquidators so that there will be more flexibility in the management of the assets.
The bank with its $2.5 billion investment is the senior creditor, followed by CCA with $150m in preferred stock in addition to its approximately $70m of unsecured claims.
Any creditors below these two groups have unsecured loans. It depends upon how this is handled as to whether these creditors would be completely wiped out or whether they will receive a percentage of what is owed them. However, unsecured creditors cannot expect to receive all that is due them.
No one, other than the Chinese Export-Import Bank, has adequate information to make an intelligent bid — we suggest that even the liquidators do not have a full grasp of what they are managing. And so whether the assets are handled by the liquidators or a Receiver, the bank and CCA holding the majority of the assets, will credit bid their claims and foreclose.
In the final analysis, Mr Izmirlian will have been removed from his “dream” and the Chinese will be the sole owners of Baha Mar. However, Bahamians have former prime minister Hubert Ingraham to thank for amending the original Christie agreement and retaining, among other things, some of the land sold in the first agreement, while leasing other areas to Baha Mar. He also retained 71.40 acres of wetland owned by Baha Mar as a “no build zone” for public use in perpetuity.
This is our prediction for the future unless the three partners can reach an agreement before November 25.