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Receivers Confident Baha Mar Buyer ‘In Place’ By End-2016

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s receivers yesterday expressed optimism that a new owner for the $3.5 billion project will be “in place” before year-end 2016, with all bids due to be submitted by May 7.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, told Tribune Business there was “no question” that the investor groups showing an interest in Baha Mar to-date had the financial and other capabilities needed to complete and open the development.

Declining to identify the potential bidders, he said their numbers were already “in the double figures”, with groups coming “from the West and the East” - the latter a reference to China and Asia.

Mr Winder said the price offered, plus the quality of bids received, will determine whether there is a second round of bidding for Baha Mar.

He added that the receivership team, which was appointed by Baha Mar’s $2.45 billion secured lender, the China Export-Import Bank, with the Supreme Court’s approval, was also expecting to receive a bid from the project’s original developer, Sarkis Izmirlian.

Mr Izmirlian, who has largely maintained Baha Mar’s original senior executive team in the hope of ‘reacquiring’ his development, recently sought to cut-out the formal sales process being overseen by the receivers via a direct offer made to the bank.

That is understood to have been rejected, and Mr Winder said there were “ongoing discussions” between the receivers and Mr Izmirlian, although he declined to go into detail.

The Deloitte & Touche (Bahamas) managing partner also confirmed that potential bidders had sent “technical teams” to inspect the Baha Mar process as part of their due diligence, so they could assess the property’s condition.

Mr Winder said the presence of these advisers on the Baha Mar campus was prompting incorrect speculation that construction work on the property is set to resume imminently, but this was “not quite so”.

“We’re going through the sales process, and as to be expected, a number of the potential bidders have expressed an interest in having their technical people view the property as a precursor to making a bid,” Mr Winder told Tribune Business.

“For the next two to three weeks, it will not be unusual to see a number of technicians from the various companies likely to make a bid by early May - May 7 or so.”

The Baha Mar site inspections may be the deciding factor in whether some bidders elect to make an offer or not and, at the very least, they will allow groups to develop an informed offer.

“All that’s happening now is that individuals are looking to use the information to assess what their ultimate bid might be,” Mr Winder reiterated, who appeared keen to manage Bahamian expectations of an imminent construction re-start.

Photos of persons wearing construction safety vests on the Baha Mar site, including one taken by government PR man, Elcott Coleby, have already been circulating via e-mail and social media.

Still, keen to reassure that progress is being made on resolving Baha Mar’s fate, Mr Winder said the prospects for the development having new ownership before 2016 year-end were “very good”.

“We should be well on the way to completing this [sales] process before year-end, in terms of having a new buyer in place,” he told Tribune Business.

But, adding a note of caution, the Bahamian accountant emphasised that much depended on whether the bids received matched the China Export-Import Bank’s expectations - especially on price.

“As of now, I have no idea what those potential bids are going to be, and ultimately whether they are going to be in the range of what the bank is looking for,” Mr Winder told Tribune Business.

“The bank hasn’t shared that with us. But the price will have to be the best price. That is a call that has to be made when we get to the point of presenting the final bids to them.”

Tribune Business has repeatedly pointed out the conundrum facing any effort to sell Baha Mar, namely reconciling the vastly different demands and objectives of the China Export-Import Bank and any buyer.

While the bank has repeatedly insisted that it be ‘made whole’, and recover its full $2.45 billion investment, any buyer will likely offer a purchase price that requires it to take a deep discount or ‘haircut’ - especially since Prime Minister Perry Christie last year placed a $600 million price tag on the construction completion.

Several observers have previously told this newspaper that the most the China Export-Import Bank can expect to recover is between 50-60 cents on the $1, especially given the deterioration in Baha Mar’s physical condition over the past year.

Mr Winder, meanwhile, said the bid prices offered would not be the only item contained in their recommendations to the China Export-Import Bank. He added that their respective resort/casino industry experiences, and development strategy for Baha Mar, would also merit consideration.

He declined, though, to place a timeline on when Baha Mar’s construction would re-start, and whether this would also occur before year-end, only saying: “You can’t say for sure about these things.”

Selecting a preferred bidder for Baha Mar is just one stage in the process. For the chosen entity will then have to negotiate and complete the deal with the China Export-Import Bank, plus obtain the Christie administration’s blessing and secure all necessary government approvals to close the deal.

“We have requested that all serious bidders take into consideration that they must have a strategic plan to share with the Government as part of the approval process,” Mr Winder told Tribune Business.

“The Government is eager to get things started, and they have a say in vetting any potential bidder.

“All I can say is that I’m optimistic, I’m happy with the quality of potential bidders expressing an interest. We now need to sit back and see precisely what the bids are going to be.”

Declining to give names, Mr Winder said of the bidders: “We have some institutions from the West, and we have some institutions from the East.

“We have sufficient that if all of them decide to bid, we could probably go to a second round to determine who is the winner.”

Mr Winder said the receivers would narrow down the number of bidders to a select few if a second round was required, and give those chosen a chance to improve their offer and price.

He added that the $50,000 fee that bidders had to pay to participate in the Baha Mar sales process, coupled with the non-disclosure agreement (NDA) they were expected to sign, had ensured it was attracting only high-quality bidders.

“We’re not getting that kind of fishing expedition, and companies that just want to sniff around,” Mr Winder told Tribune Business, adding that the process had attracted top-notch interest.

“There’s no question about it,” he said. “When you look at those groups expressing interest, there’s no question that they have the capital to meet the financial obligations. None whatsoever.

“There aren’t any doubts about whether they have the ability to identify, and secure, the existing hotels, the Hyatt and SLS, and other brands.

“They all have the financial resources and the global reach to attract partners as they see fit, and as the need may arise.”

Mr Winder said the bid groups to approach the receivers to-date featured a good cross-section of real estate developers, hotel owners, resort and casino brands, and financially-led groups.

Still anticipating an offer from Mr Izmirlian, he added: “We’re still working on it. We’re in the process of ongoing discussions and so forth. We expect to get something him, and the process is ongoing.”

Mr Winder said the receivers have not refused any bidder requests to ask questions of Mr Izmirlian and Baha Mar’s contractor, China Construction America (CCA), to-date. All answers had been placed in the data room to ensure all parties had access to the same information.

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