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Sarkis Loses Bid To Buy $192m Claims

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Sarkis Izmirlian

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Supreme Court yesterday ruled it was legally impossible for Sarkis Izmirlian to acquire the rights to Baha Mar’s $192 million damages claim against the project’s contractor.

Justice Ian Winder instead found in favour of the arguments advanced by Brian Simms QC, attorney for Baha Mar’s Deloitte & Touche receivers, ruling that the project’s original developer had no standing to ‘purchase’ the action lodged in the UK High Court.

Mr Izmirlian and his Granite Ventures vehicle, in a statement following the ruling, argued that the verdict had denied Baha Mar’s unsecured creditors an opportunity to pursue arguably the best recovery source for the multi-million dollar sums they are owed.

He said instead that Baha Mar’s Bahamian creditors had been “marginalised”, and “shoe horned” into the Supreme Court winding-up process after the Government joined his former Chinese partners in opposing the Chapter 11 bankruptcy process.

And Mr Izmirlian (Granite Ventures) said the receivers’ opposition to ‘selling’ the rights to the $192 million claim showed how the entity that appointed them, the China Export-Import Bank, was more interested in protecting its fellow state-owned entity, China State Construction Engineering Corporation (CSCEC).

“It is disgraceful that unsecured creditors have been shoe-horned into the winding up/liquidation legal process here in the Bahamas, in which their interests have been marginalised,” Mr Izmirlian and Granite Ventures charged yesterday.

“The non-performance of the defendant parties in the litigation is the very reason that Baha Mar became a tragedy for so many in the Bahamas.”

“We are disappointed in this ruling because it denies the unsecured creditors of Baha Mar the opportunity to possibly realise monies they are owed,” Mr Izmirlian and Granite Ventures continued.

“The claims made by Baha Mar against CCA and its parent, CSCEC, for non-performance are valid, as various documents - now public - about CCA cutting corners, missing its own schedules, requesting more workers from CSCEC, have revealed.”

They added that the receivers’ opposition to Granite Ventures’ motion “speaks volumes” about the China Export-Import Bank, and its relationship with Baha Mar’s contractor, implying it was more interested in protecting the project’s contractor than the interests of Bahamian creditors.

The $192 million claim against CSCEC seeks to enforce its 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.

The action was filed in the UK High Court on June 30, 2015, one day after Baha Mar sought Chapter 11 bankruptcy protection - a move that was ultimately defeated in the Bahamian and Delaware Courts.

However, Mr Izmirlian argued that the Deloitte & Touche receivers were “failing to properly pursue” the $192 million claim - allegedly one of the most valuable potential recovery sources for the project’s creditors.

Granite Ventures thus petitioned the Supreme Court on February 18, 2016, to approve a process whereby the $192 million action could be pursued in the UK High Court without the involvement of the receivers.

It provided the Supreme Court with two options for ‘monetising’ the value of Baha Mar’s claim against its contractor for the benefit of all creditors, including itself.

Granite Ventures sought an Order that would place “custody and control” of the CSCEC action into the hands of either a Baha Mar creditors’ committee or the project’s joint provisional liquidators.

However, Justice Winder’s ruling yesterday said the joint provisional liquidation team of Bahamian accountant, Ed Rahming, and the UK duo of Alastair Beveridge and Nicholas Cropper, had opposed Mr Izmirlian’s move.

And Justice Winder appeared to express scepticism that Mr Izmirlian’s pursuit of the rights to the UK action was designed to benefit all unsecured creditors.

Referring to Granite Ventures’ initial application, he said it was seeking a Supreme Court Order “to sell off the secured asset for the benefit (it says) of all creditors, both secured and unsecured”.

The term ‘it says’ suggests Justice Winder had doubts about whether Granite Ventures was acting for the benefit of all unsecured creditors, including the 123 Bahamian contractors said to be owed a collective $74 million.

Trade creditors were said to be owed a total $123 million when Baha Mar filed for Chapter 11 bankruptcy protection a year ago yesterday, with Standard & Poor’s (S&P) recently putting the total debt owed at $170 million. Then there is the severance pay and other benefits owed to the 2,000 laid-off Bahamian staff.

Whitney Thier, Baha Mar’s ex-general counsel, had alleged in a February 2016 affidavit that Granite Ventures had offered to acquire Baha Mar’s $192 million claim from the receivers in return for an immediate $250,000 payment, with the net proceeds from any successful litigation claim split 70/30 in its favour.

This meant that, should Baha Mar have been 100 per cent successful in pursuing the claim, Mr Izmirlian and Granite Ventures would have retained $134.4 million, with $57.6 million going to the receiver.

While Mr Izmirlian and Granite Ventures said yesterday that they intended to appeal Justice Winder’s ruling, the receivers, represented by Brian Simms QC and Sophia Rolle-Kapouzogalu of the Lennox Paton law firm, are objecting to this.

Tribune Business understands that another hearing will have to be held before Justice Winder to determine whether permission for Granite Ventures to head for the Court of Appeal will be granted.

Comments

Well_mudda_take_sic 5 years, 5 months ago

Sum total of what's said here: Christie, Winder (accountant), Winder Judge and the Wicked Witch of the West all royally screw the local Bahamian creditors of Baha Mar!

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John 5 years, 5 months ago

The China Bank should show good faith and pay the small creditors what is due them. If according to reports from Christie and other sources the bank intends to recover every cent on the dollar from Bah Mar then, in good faith, they should pay off the small creditor s and not have them sit around like beggars.

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