By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian fears it is “impossible” for him to enter the Baha Mar bidding process because its ‘rules’ may expose him to litigation and “contaminate” his claims against the project’s Chinese contractor.

Despite negotiations with the $3.5 billion development’s receivers, Baha Mar’s original developer has yet to reach a satisfactory agreement over the wording of the Non-Disclosure Agreement (NDA) that he and his Granite Ventures vehicle must sign.

Dionisio D’Aguilar, a member of Mr Izmirlian’s Baha Mar Board, told Tribune Business that the NDA revisions offered by the Deloitte & Touche receivership team were still “very difficult” for the former developer to “abide by”.

He explained that the problems revolve around the NDA’s clause 18, which prohibits all Baha Mar bidders from contacting either Mr Izmirlian or the project’s main contractor, China Construction America (CCA), and their respective executive teams, employees and advisers without the receivers’ permission.

As previously exposed by Tribune Business, clause 18 reads: “The potential investor shall not contact or communicate with any current or former directors, officers, employees, consultants, advisers, bankers, customers, creditors, suppliers or representatives of the group, or representatives, officers, directors of employees of CCA Bahamas, in connection with the sale without the receiver-managers’ written consent.”

Given that Mr Izmirlian and his Granite Ventures vehicle have continued to employ numerous Baha Mar executives, such as former president Tim Dunlap and ex-vice-president and legal counsel, Whitney Thier, these terms are impossible for him to meet.

Mr D’Aguilar said that following negotiations, Baha Mar’s receivers agreed to amend clause 18 to allow Mr Izmirlian to consult only former Baha Mar executives in his employment - not anyone else either presently or previously affiliated with the $3.5 billion development.

However, given Mr Izmirlian’s “long-standing” relationship with many of Baha Mar’s former advisers, executives and consultants, Mr D’Aguilar said it would be extremely difficult to meet even the new, ‘relaxed’ clause 18.

He added that it would also be hard for Mr Izmirlian to prove he had not been consulting those formerly involved with Baha Mar, and no longer in his employ, thus exposing the Lyford Cay resident and his companies to potential legal action for breaching the NDA’s sales process terms.

And, in turn, such a development could also “sully” and “contaminate” Mr Izmirlian’s existing legal actions against Baha Mar’s Chinese contractor, including the $192 million claim against its Beijing parent in the UK High Court.

The receivers have done nothing to pursue that action or force China State Construction Engineering Corporation (CSCEC) to honour the guarantees it gave, on CCA’s behalf, to complete Baha Mar.

Mr Izmirlian has sought, via the Supreme Court, to acquire the rights to these legal actions; the suspicion being that China Export-Import Bank, Baha Mar’s secured creditor, is reluctant to advance the claims against the contractor because of their common Chinese government ownership.

Mr D’Aguilar, meanwhile, suggested that the lack of flexibility over the NDA “could almost be construed” as an attempt by the Chinese to prevent Baha Mar’s original developer from bidding.

“It seems as if the receivers are making it extremely difficult for Sarkis to participate in the bidding process for Baha Mar, due to the onerous terms of the NDA that they want Granite Ventures [his company] to sign,” Mr D’Aguilar told Tribune Business.

Explaining the problems with the NDA’s clause 18, Mr D’Aguilar added: “It’s extremely difficult for Sarkis and is group to abide by the terms, and receive the information memorandum and tender process memorandum.”

Mr Izmirlian, like all rival bidders seeking to acquire the $3.5 billion project, must sign the NDA to participate in the Supreme Court-approved sales process and gain access to the electronic data room and all due diligence materials.

Mr D’Aguilar, though, said the former Baha Mar principal was “very reluctant” to sign-up to the NDA’s existing language.

“He wrote to them [the receivers] and said: ‘It’s impossible for me to sign’,” the former director told Tribune Business. “‘I know everybody and have a long-standing relationship with these people, and it’s silly’.

“The receivers responded by saying they’re going to amend that clause to say, yes, he can consult with those directors currently in his employment, and can only use the information for the purposes of the bidding.”

Mr D’Aguilar said Mr Izmirlian and Granite Ventures had wanted “the whole NDA to be removed in his case, as it’s going to be very, very hard for him to abide by those terms - almost impossible - given his previous relationship with the project.

“It could be construed as if they’re almost trying to prevent him from participating in the project and sales process. It’s very difficult for him to abide by the terms and not open himself up to litigation.

“The language in the NDA, as amended, doesn’t deal with Granite Ventures’ concerns. It does not allow Sarkis to consult the people he needs to consult, and opens him to potential litigation, which could also sully his legal action against CSCEC relating to the completion guarantee,” Mr D’Aguilar continued.

“It makes it very difficult for him to bid on Baha Mar with that NDA there. It could easily be construed that he was consulting with people he should not be consulting, given his relationships and position as the original developer.

“It’s hard for him to prove he wasn’t consulting with them, and he’s very reluctant to sign the NDA. It’s a major problem. Right now, he finds it unworkable, and he’s unwilling and unable to participate in the process.”

Mr D’Aguilar’s comments will likely have been made with inside knowledge and Mr Izmirlian’s blessing, and it is clear his concerns are genuine.

The implications, though, are many, and the situation raises questions of whether the China Export-Import Bank may be ‘cutting off its nose to spite its face’ if Mr Izmirlian feels unable to bid.

Since the Chapter 11 bankruptcy protection filing last June, the Chinese have shown every sign that they no longer wish to deal with Mr Izmirlian, and want to remove him from the Baha Mar scene. Having to go back to him as Baha Mar’s ‘saviour’ would be the ultimate loss of face.

Effectively excluding Mr Izmirlian would also run contrary to the sales process’s main objective, which is to spark a bidding war to maximise Baha Mar’s price - the key requirement for the bank, which wants to recover its entire $2.45 billion outlay.

The situation is made more extraordinary by remarks from Raymond Winder, the Deloitte & Touche (Bahamas) managing partner and member of the receivership team, who suggested that Mr Izmirlian’ offer would be the ‘benchmark’ all rivals bids would have to be assessed against.

That raises immediate questions as to why Mr Izmirlian is encountering difficulties, especially given that no rival bidder is likely to make all Baha Mar’s unsecured creditors - including Bahamians owed a collective $170 million - whole.

Mr Izmirlian has offered to do both this and repay 100 per cent of what is owed to China Export-Import Bank, something another bidder will also be extremely reluctant to do.

Observers will likely query why, assuming Mr Izmirlian has the financing to make it happen, the Chinese and receivers are not ‘laying out the red carpet’ to encourage him to bid.

Recent comments by Prime Minister Perry Christie also indicate that the Government wants Mr Izmirlian to bid, and feels that any offer coming from him should merit due consideration by the Chinese.

Mr Winder had on Thursday alluded to the situation between the receivers and Mr Izmirlian when he said: “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 D’Aguilar suggested that in trying to “negate” the natural advantage Mr Izmirlian will hold over all other bidders as Baha Mar’s original developer, the receivers were “almost forcing him not to participate”.

“They have to recognise that it’s his baby; he birthed it,.” Mr D’Aguilar added. “It’s not that he doesn’t want to disclose who he’s talking to.

“Ray Winder is obviously standing behind the process; that it has to go through the courts, and he’s looking after the interests of all the creditors.

“But it’s very, very unlikely that anyone will emerge from the process. Let’s get it going and up and running. There seems to be a bit of shuffling at the start, and this [the NDA] is a sticking point before the process even begins.

“Let’s get this guy involved and the process going. It’s a classic lesson why we should not have gone through the receivership process. It’s untried, untested and running into headwinds at the outset. The Bahamian people and the Government want this project started.”