The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas “can’t lose” in the long-term regardless of who ultimately ends up controlling the $3.5 billion Baha Mar development, a prominent businessman believes.

Franklyn Wilson, the Arawak Homes chairman, told Tribune Business it was in “no one’s interests” to leave the Cable Beach project unfinished, adding that the only real issue was whether the original developer, Sarkis Izmirlian, will remain in place.

He suggested that “much depends” on tomorrow’s ruling by the Delaware Bankruptcy Court on the bid by Baha Mar’s Chinese partners to have the Chapter 11 case dismissed, arguing that this would pave the way to a swifter, simpler resolution via the Bahamian courts in the absence of a commercial settlement.

“I don’t see how the country can lose through this process other than time,” Mr Wilson said, referring to last week’s appointment of joint provisional liquidators for seven key Baha Mar group companies.

“The country can’t lose. Everybody wants this thing to happen soon; the faster the better. But look at the outcomes. I can’t see the hotels staying there unfinished for a long period of time. That’s in no one’s interest.

“It’s going to finish either with Mr Izmirlian as the controlling mind and management, or the bank (China Export-Import Bank) taking control through some sort of receiver, or through a sale [by the liquidators],” Mr Wilson added.

“It might take longer than contemplated, but in the long run I don’t see how the country can lose. The worst thing that would happen; the biggest loss, is time.”

Not all observers would agree with Mr Wilson’s view. Both Mr Izmirlian and Dionisio D’Aguilar, a Baha Mar Ltd director, have argued that placing the $3.5 billion project into liquidation and ousting its ownership/management team would be the worst route to take in terms of prolonging its completion and opening.

They have both said that the developer’s removal would cause the hotel brand and other key commercial relationships to unravel, forcing the liquidators and/or new owner to start afresh - a process that will take months, if not years.

And any ouster of Mr Izmirlian is likely to result in a prolonged legal battle in the Bahamian, US and UK courts, a development that would deter many potential buyers from acquiring Baha Mar. And, as any businessman would say, time is money.

Justice Ian Winder’s decision to appoint provisional liquidators for Baha Mar, but hold off on hearing the winding-up petitions against the project until November 2, has effectively placed all parties (especially the developer) into a two-month ‘last chance saloon’ to agree a deal for restarting the stalled project.

Mr Wilson, meanwhile, suggested that prospects for a speedy resolution to the Baha Mar impasse would be enhanced if Judge Kevin Carey were to dismiss the Chapter 11 bankruptcy protection case filed by Mr Izmirlian.

“My view is that a lot still depends on what happens on Tuesday in the US bankruptcy court,” he told Tribune Business. “If the judge were to eliminate that [Chapter 11] case, that would eliminate the conflict of jurisdictions and be the best thing for the process.

“If the judge were not to dismiss it, that will continue this conflict of jurisdictions and really create some problems. A lot turns on that. If there’s no competing jurisdictions issue, then the liquidators’ hands are not tied and the process becomes a lot simpler.”

Tribune Business sources close to Baha Mar acknowledged that Mr Izmirlian would be in trouble should Judge Carey rule against him this week, as it would place the Government and his Chinese partners firmly in the driving seat.

They would be able to ‘tighten the screws’ on him, and either force him into an unfavourable deal or try to take control of Baha Mar altogether.

Justice Ian Winder has already refused to recognise the Chapter 11 proceedings in the Bahamas, but the Delaware case has effectively acted as a ‘roadblock’ to both the China Export-Import Bank and China Construction America’s (CCA) efforts to squeeze Mr Izmirlian.

Neither wants to violate court orders issued by the US judicial system, especially given that they have US assets and business interests that could be jeopardised by such a move.

This has prevented China-Export Import Bank from moving to realise on its $2.5 billion security over Baha Mar’s real estate assets via the appointment of a receiver or some other action.

A favourable ruling in Delaware would thus pave the way for it to take its own action, and not have to rely on either the joint provisional liquidators or the Government’s November 2 winding-up petition.

Mr Wilson, though, said he was “praying” that an out-of-court settlement could be reached where Mr Izmirlian remained in control of a project he had brought to 97 per cent completion.

“From the very first time I spoke to you on this matter, I said Mr Izmirlian deserves a lot of thanks and gratitude from the Bahamian people for developing what he said he was going to develop, and staying with it for as long as he did,” he told Tribune Business.

“Anyone with an ounce of goodwill in them would be saddened that it’s come to the point where he may lose control.

“But, as humanitarian and compassionate as we may wish to be, there’s a national good, a national imperative. It remains my prayer that however this plays out, I would love to see Mr Izmirlian remain in control of the project, but if that’s not to be, that’s not to be. It’s the national interest that takes priority.”

The joint provisional liquidators, Bahamian accountant Ed Rahming, a partner in KRyS Global (Bahamas), and two UK accountants, Nicholas Cropper and Alastair Beveridge of AlixPartners Services, have taken control of Baha Mar’s real estate and remaining financial assets.

Their job, for the next two months, is to preserve and maintain the project’s value, plus engage with Baha Mar, its two Chinese partners and the Government to see if a commercial solution can be structured.

While in theory they can dismiss non-senior management staff and sell Baha Mar’s hotel and real estate assets, such actions must first be approved by Justice Winder and the Supreme Court.