By KHRISNA VIRGIL
Tribune Staff Reporter
AMID continued concern over the shuttered Baha Mar resort, Prime Minister Perry Christie revealed that two firms, one with ties to Bahamian investors, have been shortlisted as the court-appointed receivers of the project move closer to deciding which entity will acquire the $3.5bn West Bay Street development.
However, he said the final decision is solely at the discretion of receiver managers who are currently in Beijing, China negotiating a contract to remobilise and complete the project as soon as possible.
Mr Christie said China State Construction Engineering Corporation (CSCEC) along with the resort’s general contractor China Construction America (CCA), its subsidiary, are also participating in the talks.
He did not name the two shortlisted groups, but said neither involved developer Sarkis Izmirlian. He added that the government of the Bahamas was not privy to the content of the ongoing discussions in China.
“Mr Speaker, this is a matter which will require negotiations primarily with a new investor in this project who has yet to be decided upon by the China Export Import Bank,” Mr Christie said as he wrapped up debate on the 2016/2017 budget.
“The current position, I am understanding, is that two firms have been short listed, Mr Speaker.”
He further maintained that the government was not colluding with the Chinese to shun Mr Izmirlian, adding that it had not given economic citizenships as a concession to entice CSCEC and CCA to complete Baha Mar.
This, Mr Christie said, was “totally” false.
He also suggested that Fort Charlotte MP Dr Andre Rollins had incited xenophobia and ill will toward Chinese nationals when he spoke in the House of Assembly about Baha Mar last week. Last week Dr Rollins said if the FNM wins the next election, it reserved the right to void any agreement it did not think was in the country’s best interests.
Dr Rollins said he forcefully rejected Mr Christie’s suggestion.
Dr Rollins said: “The information from the prime minister is that I in some form or in some way stoked prejudice and xenophobia with respect to my commentary during the course of my budget communication. I would just like to forcefully and categorically reject the assertion made by the right honourable prime minister that I sought to insert prejudice or xenophobia in relation to this matter.
“The facts of the matter are notwithstanding everything that I have said as it relates to the intention of the Free National Movement government to promote the best interest of the people of the Commonwealth of the Bahamas and to promote sovereignty of this country, there has been no rejection or disagreement expressed by either the leader or the deputy leader (of the FNM) in so far as anything that I said.”
Given the immense speculation regarding the government’s involvement in Baha Mar’s current state, Mr Christie read into the record of the lower chamber legal advice the government received from its international lawyers regarding Mr Izmirlian’s Chapter 11 Bankruptcy filing last June.
He was referring to advice from US law firm Hogan Lovells and UK firm Charles Russell Speechlys LLP.
The UK based attorneys pointed out that Mr Izmirlian was without funds and his promises of funding were without foundation.
“It is not disputed that the US Chapter 11 process can be a highly effective tool with which to enable a debtor to restructure its affairs in such a way that will ensure its future survival,” the memo from Charles Russell Speechlys, dated June 20, 2016, said.
“The Baha Mar companies had almost no cash reserves, no source of income and even if the reported sum of $600m could have been found to complete the works, there was no evidence that the substantial amount of working capital that would be required was in place to see the resort trade through to break even.
“The Chapter 11 process was a device (either whole or in part) designed to strengthen Sarkis Izmirlian’s hand in negotiations with CEXIM, CCA and the government of The Bahamas. The dismissal of the Chapter 11 process resulted in the loss of that hand.”
The memo continued: “Sarkis Izmirlian was invited back to the negotiating table and whilst he purportedly committed to making further funds available (up to $200m), the conditionality that he placed around that funding was untenable to CEXIM and/or CCA.”
Reading a memorandum from the US based attorneys, Mr Christie said their positions aimed to dispel confusion and explain his administration’s support for plans to complete Baha Mar. It was also dated June 20, 2016.
“The passage of time (since Judge Kevin Carey of the United States Bankruptcy Court for the District of Delaware dismissed the Chapter 11 cases filed in June 2015) and fading memories have left room for mistaken impressions about the short-lived Chapter 11 cases and what those cases could have been expected to accomplish,” Hogan and Lovells’ memorandum read.
“The Chapter 11 filings were preceded and followed by extensive negotiations among the Baha Mar debtors and their principal, developer Sarkis Izmirlian; CEXIM; and CCA Bahamas Ltd and CSCEC – negotiations in which the government sometimes participated. We did not participate in those negotiations, but it appears from the surrounding correspondence and drafts that the financial condition of Baha Mar debtors accurately reflected Mr Izmirlian’s ability to devote additional resources to the Baha Mar project. Although Mr Izmirlian repeatedly proposed to provide additional funding, that funding never materialised.
“The Chapter 11 filings offered the Baha Mar debtors and Mr Izmirlian short term tactical benefits – at a steep price.”
Hogan Lovells said the filings enabled the developer to temporarily retain control of Baha Mar rather than relinquishing control to independent liquidators or receivers.
The firm argued that had the Chapter 11 case continued, the filings would have enabled the Baha Mar debtors to assume or reject continuing contracts, deciding which to retain and which to discard generally leaving the counter parties to discarded contracts with nothing more than unsecured damage claims.
“Although Baha Mar debtors claimed that they filed the Chapter 11 cases ‘with the primary goal of putting the Baha Mar project on a firm financial foundation so that construction could be completed and the project opened to the public as soon as possible’ that claim was unrealistic, at best.
“The plan was nothing more than a hypothetical construct, depending on the availability of hundred of millions of dollars of exit financing that the Baha Mar debtors stood no chance of obtaining,” the US law firm said.
“The developer of a partially completed real estate project can ill afford any protracted dispute with its secured lender unless the project can be refinanced from other sources. Notwithstanding Sarkis Izmirlian’s claims to the contrary, there never appears to have been any realistic possibility that refinancing or additional financing of the Baha Mar project could be available from any source other than CEXIM – or a lender to a new owner of the project.”
However, Dr Rollins rejected this saying the government had paid its attorneys to speak in favour of its decision to collude with the Chinese, adding that he viewed this as an attempt to mislead the public by the prime minister.
“The two pieces of correspondence referred to by the prime minister in relation to the Baha Mar Chapter 11 process, I would like for the record to reflect that those opinions were received from the government’s lawyers in the United States and the United Kingdom,” Dr Rollins said.
“It stands to reason that those opinions were paid for by the government of The Bahamas and the correspondence were dated June the 20th as indicated by the prime minister and not at the time that this matter was actually in full bloom.
“So we had no way of knowing whether or not this was a rushed and panicked effort by the government to seek to provide itself some relief from all the criticism and Mr Speaker in relation to what he read it said specifically from the correspondence that from ‘those instructing us’ meaning they were receiving instructions from the government.
“We have no way of knowing, seeing that these are legal opinions provided by legal council of the government of the Commonwealth of The Bahamas. We have no way of knowing that we can rely on the objectivity of these opinions.”
Mr Christie said both the US and UK based attorneys have been retained by successive governments. He said all he requested of them was to sum up the matter in order to make public what their advice to the government was on these issues.