The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar was still awaiting the court Order appointing the joint provisional liquidators and spelling out their powers after the business close at 5pm yesterday, Tribune Business can reveal.

Sources close to the developer, speaking on condition of anonymity because they were not authorised to address the media, told this newspaper that they had been promised the Order last night after this section went to press.

Whether it ultimately emerged is unclear, but the “considerably limited powers” granted to the joint provisional liquidators by Supreme Court Justice Ian Winder are critical in determining Baha Mar’s immediate future - perhaps for two months.

For the Government and developer have vastly different interpretations of how Justice Winder’s Friday ruling will operate in practice.

While the winding-up petition to put Baha Mar into full liquidation has been stayed for two months until November 2, the Gaming Board’s attorney, Wayne Munroe, has been arguing that the provisional liquidator appointment means Sarkis Izmirlian has lost control of the $3.5 billion development.

That does not square with Mr Izmirlian’s message to Baha Mar staff post-Friday’s hearing, in which he implied that the joint provisional liquidators would be working alongside Baha Mar management to maintain and preserve the project’s assets for the next 60 days.

Suggesting that this meant anything but a ‘loss of control’, Mr Izmirlian said Justice Winder’s decision left the way clear - at least for the short-term - for Baha Mar to pursue its Chapter 11 reorganisation in the Delaware Bankruptcy Court.

The Supreme Court Order appointing Bahamian accountant Ed Rahming, a partner in KRyS Global (Bahamas), as Baha Mar’s joint provisional liquidator with two UK accountants, Mark Cropper and Alastair Beveridge of AlixPartners Services will be key in determining what Baha Mar can and cannot do.

It is possible, given the remit to protect and preserve assets, that the joint provisional liquidators could have the power to control all Baha Mar’s spending - something that can block financing of the Chapter 11 litigation, although Mr Izmirlian could potentially finance that from his own pocket.

Justice Winder, in his written ruling released yesterday on the joint provisional liquidators’ appointment, said he would allow them to negotiate a potential restructuring of Baha Mar with all interested parties.

“I will permit the promotion of a scheme of arrangement and/or compromise with all stakeholders (contributories and creditors),” Justice Winder said.

“I am satisfied that the facts of this case warrant the empowering of provisional liquidators to promote a scheme/plan of compromise between all stakeholders which could result in the reversal of the company’s insolvent status. Such a solution would surely result in the prevention of the dissipation of the assets of [Baha Mar].”

That seems to imply that Baha Mar and the Izmirlian family will be included in any such talks, which is not what the Government wanted.

The submissions advanced by the Christie administration and its agencies in support of their winding-up petitions argued: “In particular, the provisionl liquidators will be able to negotiate with China Export-Import Bank and China Construction without the current antagonism and, if that fails to produce any result they will be able to pursue alternative solutions and sources of finance to enable the project to be completed, and the resort to be opened, and income to be earned.”

The Government thus clearly does not see a future where Mr Izmirlian remains at the Baha Mar helm, should a commercial out-of-court settlement not be reached and the winding-up petitions proceed.

Elsewhere, Justice Winder criticised as “untenable” the Attorney General’s position over the Government’s original $59 million winding-up petition, as it breached the Companies’ Liquidation Rules that stipulate such an action cannot be brought against more than one company.

The Government’s initial winding-up petition was brought against 14 Baha Mar companies, something the judge described as “grossly irregular”.

He also agreed that the Government’s three attempts at settling on joint provisional liquidators, with both PricewaterhouseCoopers (PwC) and Ernst & Young discarded before the current incumbents were selected, were “an understandable cause for angst” by Baha Mar.

And, in finding that the Government had not proven its “public interest” argument for Baha Mar’s wind-up. Justice Winder branded the court case cited by Prime Minister Perry Christie in his national address to justify the Government strategy as “not particularly helpful” to him.

However, Justice Winder said that based on Baha Mar’s own evidence, six of its companies were insolvent and their circumstances were getting worse.

“The respondents cannot continue to trade unsupervised where there are no discernible prospects of the project being completed in the absence of new financing, which they say they are unable to access,” Justice Winder said of Baha Mar.

“With no source of income, and admittedly no liquidity, it cannot continue to meander and consume its available assets to the detriment of its unsecured creditors and must be brought under the supervision of the court if only provisionally until the petition can be heard.”