By NEIL HARTNELL
Tribune Business Editor
The Chinese “assured” the Government one year ago that they would finance and complete the $3.5 billion Baha Mar project if its Chapter 11 bankruptcy protection was removed.
The pledges, by China Export-Import Bank, the development’s $2.5 billion secured lender, and China Construction America (CCA), are revealed in a June 20, 2016, memorandum sent to the Christie administration by its UK legal advisers.
The memorandum’s contents, perhaps unwittingly, will raise fresh questions about whether the Government fell for Chinese ‘promises’, and if these induced it to resist Baha Mar’s Chapter 11 move and facilitate the removal of Sarkis Izmirlian as developer.
Charles Russell Speechlys, the London-based law firm that acts as the Government’s UK attorneys, noted that both Chinese state-owned entities had opposed Mr Izmirlian’s Chapter 11 move, and argued that “they were not bound by it”.
The memorandum, which indicates it was crafted and sent in response to the Christie administration’s request the day before, states that the Government - probably via the Attorney General’s Office - informed Charles Russell of the Chinese ‘completion’ promises.
“China Export-Import Bank expressed their support for the Bahamian provisional liquidation process, and (we understand from those instructing us) had provided assurances to the Government of the Bahamas that should the Chapter 11 process fall away, funding would follow, as would the resumption of work,” Charles Russell Speechlys’ memorandum said.
Neither of these two “assurances” has yet to materialise, with China Export-Import Bank, especially, seemingly reluctant to invest another cent in the Baha Mar project.
Prime Minister Perry Christie has repeatedly touted the so-called ‘framework agreement’ recently reached between the Government and the two Chinese companies, but this appeared to be nothing more than ‘an agreement to keep talking, and trying to negotiate an agreement’.
Mr Christie said on Wednesday, in wrapping up the Budget debate, that Deloitte & Touche, the court-approved receivers for Baha Mar, were currently in Beijing negotiating a ‘construction agreement’ with CCA and the bank.
However, no deal for remobilisation, and Baha Mar’s physical completion, has been sealed as the one-year anniversary of Mr Izmirlian’s defeated bid for Chapter 11 protection nears.
The ‘assurance’ revelations come as BMD Holdings, the investment vehicle controlled by Mr Izmirlian, yesterday said the Government had “reaped what it has sown” by successfully opposing the Chapter 11 protection, thereby setting in motion events that led to the developer’s removal.
It argued that the $3.5 billion project was ‘no further forward’ than when Mr Izmirlian filed for Chapter 11 on June 29, 2015, with no Bahamian creditors paid, and 2,000 laid-off employees having no job to return to.
Mr Izmirlian and BMD Holdings again accused the Government of colluding with the Chinese to “sabotage” Baha Mar’s Chapter 11 bankruptcy protection, and claimed it had put CCA and China Export-Import Bank’s interests above those of Bahamian creditors.
Describing the hurried analyses by the Government’s US and UK attorneys as “flawed”, Baha Mar’s original developer said they ignored the main reason for the project’s failure to open and fall into Chapter 11 - the inability of CCA to complete construction on time, and on budget.
Mr Izmirlian branded the Prime Minister’s latest comments on the Baha Mar impasse as “head-scratching statements”, and reiterated that unsecured creditors - including the Bahamian contractors owed a collective $74 million - had been left “twisting in the wind”.
Pointing out that the Baha Mar creditors’ committee had supported the continuation of Chapter 11, BMD Holdings said: “The public record since the Government’s ill-conceived opposition to the Chapter 11 has turned up documentation revealing duplicity, misconduct, and unquestionable failure to perform by CCA - the very company that failed to deliver Baha Mar despite multiple promises, and whom the Government of the Bahamas supports instead of the developer.
“The Government of the Bahamas is reaping what it has sown. Baha Mar is not built. Baha Mar is not open. And, while China Export-Import Bank under the winding up/liquidation process has been able to protect its interest in Baha Mar, no Bahamian unsecured creditors have been paid, and many Bahamians remain shamefully unpaid and out of work.”
Charles Russell Speechlys, in its June 20 memorandum, said: “The Government’s key objective throughout was to expedite the completion of project and to see the resort open, whilst protecting the interests of Bahamian creditors.”
Whether the current process, which saw the Government successfully petition the Supreme Court for Baha Mar to be placed into provisional liquidation, subsequent to the Chapter 11 end, is best for achieving these objectives is open to question - especially since the Chinese have yet to follow through on their “assurances”.
Mr Izmirlian and BMD Holdings argued yesterday that the Government, by uniting with CCA and the China Export-Import Bank to prevent the Chapter 11 process’s recognition by the Supreme Court, had paved the way for the Chinese to take complete control of Baha Mar’s fate.
The China Export-Import Bank subsequently appointed its own receivers to take control of Baha Mar, and initiate a formal sales process to find a purchaser that would make its $2.5 billion debt ‘whole’.
Mr Izmirlian said this had ensured “the interests of the Chinese enterprises were best preserved, even though this resulted in hundreds of unsecured Bahamian creditors not being paid and left without a voice in this process, unlike the Chapter 11 proceedings.
“Unlike the Chapter 11 process, in which the debtor is given the time to reorganise its business under the supervision of the court, China Export-Import Bank now has complete control of the potential completion of the Baha Mar property under the present winding-up/liquidation process, while unsecured creditors are left twisting in the wind,” BMD Holdings.
“Under Baha Mar’s Chapter 11, the committee representing the interests of unsecured creditors supported the debtors’ plan of reorganisation (which proposed to pay Bahamian creditors of Baha Mar 100 cents on the dollar) and fought against the efforts by the Chinese entities to have the Chapter 11 process dismissed. The Government of the Bahamas’ opposition of the Chapter 11 has now left unsecured creditors out in the cold.”
BMD Holdings said the Prime Minister had admitted, via a Tribune Business article on Monday, that the Chinese have no obligation to pay Baha Mar’s unsecured Bahamian creditors, which was why he was pushing so hard on this issue.
Yet the ‘framework agreement’ with the two Chinese state-owned entities deals with this issue in extremely vague language, which stops well short of a commitment to pay the Bahamian creditors anything - much less make them whole.
Mr Izmirlian and BMD Holdings described the timing of the memorandums from the Government’s US and UK legal advisers as “quite astounding”, given that it was almost one year after Baha Mar filed for Chapter 11. They argued that both documents were an attempt to justify the Christie administration’s “ready-fire-aim” actions, as it came under pressure over the continuing impasse and its relationship with the two Chinese entities.
The main justifications provided for the Chapter 11 opposition were that Mr Izmirlian had no realistic prospect for raising the $600 million necessary to complete and open Baha Mar, and that his move was merely designed to strengthen his negotiating position.
And there was the ‘sovereignty’ argument, in that Bahamian courts should not be made secondary to foreign courts in dealing with winding-up/receivership matters where the companies and assets involved are domiciled primarily in this jurisdiction.
BMD Holdings and Mr Izmirlian did not directly respond to the ‘show me the money’ call by the Government’s two foreign law legal advisers, but argued that claims they could not raise the necessary financing were “completely at odds” with recent comments by the Prime Minister.
They quoted Mr Christie as saying on April 13, 2016, that “clearly Izmirlian comes from a family that isn’t short on money.”
BMD Holdings added: “It also runs counter to the fact that Mr Izmirlian has already invested almost $1 billion in the Baha Mar project.”
Tribune Business last year reported that Mr Izmirlian’s reluctance to provide additional financing, or enter into any new funding agreements, was due to CCA’s continued involvement.
He wanted the contractor removed, and was also unhappy at the terms and conditions the Chinese were seeking to impose upon him.