Sarkis Pushes For Full Baha Mar Liquidation


Tribune Business Editor


Sarkis Izmirlian yesterday again sought to present himself as the ‘champion’ of Baha Mar’s unsecured Bahamian creditors, as he moved to push the $3.5 billion development into full liquidation.

The original Baha Mar developer’s Granite Ventures vehicle, in papers filed with the Supreme Court, is seeking to replace the National Insurance Board (NIB) as the entity seeking the project’s winding-up/full liquidation.

And it is also pressing the court for an “expedited hearing” of the winding-up petition, filed by several government entities on July 7 last year, as part of its strategy to move Baha Mar from provisional to full liquidation.

The rationale for Mr Izmirlian’s move is detailed in yesterday’s affidavit from Whitney Thier, Baha Mar’s ex-general counsel, who alleged that the project’s current provisional liquidation “offers little to no hope” that unsecured creditors will ever recover monies owed to them.

She claimed that the joint provisional liquidation team of Bahamian accountant, Ed Rahming, and the UK duo of Alastair Beveridge and Nicholas Cropper, had done nothing to protect or “benefit” Baha Mar’s unsecured creditors since their appointment by the Supreme Court on September 4 last year.

Pointing out that the joint provisional liquidators had refused to support Mr Izmirlian’s bid to purchase the rights to Baha Mar’s $192 million legal claim against the project’s main Chinese contractor, Ms Thier said the trio had not received sufficient funding to ensure they effectively performed their role.

This had placed sole control of Baha Mar’s fate into the hands of its secured creditor, the China Export-Import Bank, and its court-approved Deloitte & Touche receiver/managers on October 30, 2015.

Ms Thier alleged that as ‘agents’ for the China Export-Import Bank, the receivers had “made expressly clear their lack of interest” in whether Baha Mar’s unsecured creditors would recover any, some or all of the monies owed to them.

Hence the move by Mr Izmirlian and Granite Ventures to “break the deadlock” by replacing NIB as the petitioner, and “accelerating” the Supreme Court’s hearing of the winding-up petition before the scheduled September 30, 2016, date.

If successful, they are proposing that two Ernst & Young accountants, Bahamas-based Igal Wizman, and Roy Bailey from Bermuda, be appointed as the Baha Mar project’s full liquidators.

Ms Thier alleged that their appointment “would offer increased protection” to Baha Mar’s unsecured creditors, as the Ernst & Young duo would expand the project’s “asset pool” through pursuing existing and potential claims against its Chinese partners.

And besides acting as a “check” on the power of the receivers, she added that the Ernst & Young duo would be more attuned to the needs of unsecured creditors because they had no connection to the Government or NIB.

“Granite remains deeply concerned about the continuing failures to realise or even investigate certain valuable assets in the estate of Baha Mar, including the Baha Mar claim and other valuable claims, for the potential benefit of its unsecured creditors,” Ms Thier alleged.

She added that the Supreme Court’s recent rejection of Mr Izmirlian’s bid to acquire the rights to Baha Mar’s $192 million damages claim against its contractor’s parent “reflects the almost complete lack of current protection for Baha Mar’s unsecured creditors”.

They number several thousand, and include the 123 Bahamian contractors owed a collective $74 million, plus numerous suppliers and vendors, and the 2,000 local employees who were made redundant from the property last all.

Documents filed with the Delaware bankruptcy court last year alleged that 3,523 of Baha Mar’s 5,172 creditors were Bahamas-based, with trade creditors owed a collective $123 million.

Ms Thier, though, alleged that the joint provisional liquidators, who were charged with protecting the unsecured creditors’ interests, had “taken no steps at all to benefit” them.

She pointed to Justice Ian Winder’s recent ruling in the $192 million claim, where he found that only the joint provisional liquidators had an “interest in the equity of redemption of the receivership assets” - meaning they are holding the unsecured creditors’ interests on trust.

As for the Deloitte & Touche receivers, Ms Thier said their recent court filings “make expressly clear their lack of interest in Baha Mar’s unsecured creditors”.

Their May 20, 2016, court submissions, alleged state that they “owe no duties to unsecured creditors like Granite, and therefore they cannot be obligated to answer for the manner in which they seek to manage the property at this stage”.

All this, Ms Thier alleged, meant that no one had “investigated and pursued” the $192 million legal claim against China State Construction Engineering Corporation (CSCEC), which arguably represents one of the best recovery sources for unsecured creditors.

The $192 million claim seeks to enforce CSCEC’s May 12, 2011, guarantee that China Construction America (CCA), its subsidiary, would perform all necessary obligations under the terms of its Baha Mar construction contract.

Ms Thier, though, alleged that there were other potential claims that could be advanced against both CCA and CSCEC, plus the China Export-Import Bank.

She added that the receivers, as agents of the latter, were unlikely to pursue any of these potential recovery sources, especially given that any legal action against CCA would undermine talks to restart Baha Mar’s construction. And, as state-owned entities controlled by the Beijing government, neither CCA not the China Export-Import Bank will be inclined to pursue action against the other.

Ms Thier said the winding-up petition’s history had been one of “delay upon further delay”, with neither NIB nor any government creditor showing any inclination to put Baha Mar into full liquidation.

After initially being filed on July 17, 2015, the winding-up petition was first adjourned following the appointment of the provisional liquidators to November 2, 2015. Further adjournments to February and May 2016, and now to end-September 2016, followed.

“From this sequence, it obviously follows that more than a year has passed since the effort to wind-up Baha Mar was initiated,” Ms Thier alleged.

“To put this in context, the Order appointing the joint provisional liquidators envisaged a hearing of the petition as long ago as November 2, 2015. Given the delays to-date, Granite would expect further requests on behalf of NIB for adjournment of the petition.”

She continued: “The pending winding-up petition offers little to no hope for unsecured creditors in its current form with [NIB] as petitioner, and the current joint provisional liquidators proposed as the liquidators...

“If and when the court is finally asked to determine the petition, appointment of the joint provisional liquidators as full liquidators is not something that Granite expects to be of assistance, at least to the unsecured creditors.

“No substantive steps - at least none known to the court - have been taken by the joint provisional liquidators.”

Ms Thier alleged that replacing NIB as the ‘winding-up petitioner’ with Granite Ventures, and moving Baha Mar to full liquidation, “is the obvious way for breaking through the current deadlock”.

She argued that, as an unsecured creditor of Baha Mar, which was owed more than $2 million, Granite Ventures had standing to bring such a petition.

“The Baha Mar project is not only of critical importance to the economy of the Bahamas, it is also of critical importance to the many unsecured creditors (including Granite) who continue to be owed substantial sums by Baha Mar,” Ms Thier alleged.

“As the situation currently stands, such unsecured creditors have no protection and cannot look to anyone - either the joint provisional liquidators or the receiver - to act in their interests.”


John 3 years, 8 months ago

China has built cities to accommodate 1 million residents, yet only 28,000 (yes Twenty Eight Thousand) people live there. They have tried to build a duplicate city of Manhattan, it remains unfinished since 1998. The Chinese tried to copy Disney World, but before the project was completed, it was abandoned because of disputes over land prices. They tried to build a replica of London but the project is incomplete. They have built a $61 million airport, but yet it receives only 5 flights a day. Shopping malls, some of the largest in the world are strewn across China but many of them remain abandoned and unused and the list goes on and on. Most of China's projects were not abandoned for lack of funds because of lack of proper planning and forward thinking. And there and many projects around the world that china has abandoned, some involving the China Construction Company, that had serious construction defects and are at a standstill or had to go many millions over budget to get completed.


It is time for the Bahamian people and the Government of the Bahamas and all other parties who have an interest to join forces and bring pressure of the Chinese to get Bah Mar open. And rather than even considering additional concessions and tax breaks, the government should seek to get equity in Bah Mar for Bahamian people's land and stop giving it away.


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