The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian yesterday slammed the “astounding” praise lavished by Baha Mar’s receivers on the project’s contractor, and questioned whether his bid was being used as “a stalking horse” to ultimately justify rejecting all offers for the property.

Baha Mar’s original developer, in another terse letter sent to the development’s Deloitte & Touche receivership team, questioned whether the main objective of the recently-initiated sales process was to protect China Construction America (CCA) and its continued involvement in the project.

The letter, written on behalf of Mr Izmirlian’s Granite Ventures vehicle by Whitney Thier, Baha Mar’s former in-house legal counsel, implied that the receivers and the China Export-Import Bank were unlikely to receive a better offer than his.

Mr Izmirlian has repeatedly offered to make both the bank and all Baha Mar’s Bahamian ‘unsecured’ creditors ‘whole’, something that other bidders are unlikely to offer.

However, this has been met with a stony silence from both the China Export-Import Bank and its political masters in Beijing, while the receivers have continually insisted that Mr Izmirlian must submit a bid via the formal, Supreme Court-approved sales process.

Ms Thier’s letter, on Mr Izmirlian’s behalf, strongly suggested that this process was a waste of time, and that the receivers and China Export-Import Bank instead needed to negotiate with him “rather than let the property erode and the Bahamian people be disadvantaged”.

It also appeared to question the Chinese bank’s motivations and intentions, noting that it was free to “abandon the sales process” if bids were not to its satisfaction, and instead try and negotiate a private deal to sell Baha Mar.

Referring to recent comments by Raymond Winder, Deloitte & Touche (Bahamas) managing partner and one of the receivers, Ms Thier pointed to the contradictions they exposed in the receivers’ and bank’s approach.

“You assert in the press that our proposal is attractive even though you ignored it,” she told the Baha Mar receivers, who also include two Hong Kong-based Deloitte accountants.

“We can satisfy China Export Import Bank’s economic needs and pay the unsecured creditors. We have the resources and unparalleled knowledge of the Baha Mar project.. No one has a greater commitment to the people of the Bahamas.”

This is a direct riposte to Mr Winder’s comments last week, which indicated that Mr Izmirlian’s offer would be the ‘benchmark’ all rival bids would have to be assessed against.

China Export-Import Bank has repeatedly indicated its main objective in selling Baha Mar is to recover 100 per cent of its total outlay on the project, something Mr Izmirlian has committed to do.

He has also promised to make all Baha Mar’s unsecured creditors, including Bahamians owed a collective $170 million (some 123 contractors are owed $74 million of this) whole, too.

Taking Mr Izmirlian at his word, and assuming he has the financing to make it happen, the offer by Baha Mar’s original developer would appear to leave all rivals ‘in the shade’.

No other buyer is likely to offer to make the China Export-Import Bank and other creditors ‘whole’, as they will be seeking a deal and probably offer ‘cents on the $1’ to purchase the $3.5 billion development.

Addressing the receivers directly, Ms Thier said: “Your comments make clear that there is not a need for the [sales] process, or at least for our participation in it, given that China Export-Import Bank is free to decide privately to abandon the public sales process it has launched and take another, more private sale route if it decides that the bids are not in the range it is seeking.

“You say that you do not even know what the bank will use as its criteria for bids, but it appears that it may be that our offer is the benchmark.”

She continued: “You now seem to be using us a stalking horse, telling other potential parties that if they want to bid successfully, they must top our offer.

“Isn’t this just a signal to potential bidders that unless there is no discount on the debt and creditors will be paid, then China Export-Import Bank does not intend to accept any of the bids? You already have this in hand with our proposal.”

Mr Winder could not be contacted for comment yesterday, and he declined to respond on Friday after Mr Izmirlian suggested the terms of the non-disclosure agreement (NDA) he was being asked to sign were making it “impossible” for him to bid.

Ms Thier’s letter, though, raises questions as to why the China Export-Import Bank is determined to proceed with the sales process, even though it already has an offer promising it will not have to ‘take a haircut’ on what is owed to it.

It raises questions as to whether the Chinese state-owned bank may use Mr Izmirlian’s offer to justify rejecting all other bids and end the sales process, then either hold on to the $3.5 billion development or try to strike a deal with another Chinese group.

These could include the Fosun Group, the Club Med and Cirque du Soleil owner, which has already shown an interest in Baha Mar, plus the likes of CCA and China Harbour Engineering Company. The latter loaned $50 million to finance the receivership, and now stands as a priority creditor ahead of the bank.

Mr Izmirlian, meanwhile, also employed yesterday’s letter to take aim at Mr Winder’s seeming praise for CCA, and his belief that it is best-placed to complete Baha Mar in the quickest possible time, given its prior involvement and knowledge of the project.

“Your effusive comments about CCA, including your view that CCA will be better and more quickly able to complete the project than another contractor, and the implication that their pre-receivership costs should be paid, are astounding,” Ms Thier told Mr Winder.

She then, on Mr Izmirlian’s behalf, struck directly at the seemingly-cosy relationship between CCA and the China Export-Import Bank, and the latter’s refusal to pursue active litigation against the contractor’s parent and enforce a guarantee it gave promising Baha Mar would be completed.

Common ownership in the form of the Beijing government is the likely explanation for why the bank has not instructed the receivers to pursue these claims, and Ms Thier said they appeared to have “brushed aside” the $192 million UK High Court action against China State Construction Engineering Corporation (CSCEC).

These, she added, related to CCA’s “construction failures”, particularly its failure to complete Baha Mar on time, and on budget, by March 27, 2015.

“Instead of attempting to cause CSCEC to complete the project pursuant to its completion guarantee, CCA is welcomed as a bidder and recommended as the contractor,” Ms Thier wrote.

“Was the bank’s refusal to negotiate with us and instead opt for this opaque and prolonged sales process really about preserving CCA’s role in the project, and protecting CSCEC and CCA?”

She then queried the fate of the legal claims against CCA, asking whether the China Export-Import Bank “intends to write them off, to the detriment of the unsecured creditors”.

Mr Izmirlian’s camp has argued that the $192 claim represents one of the best recovery sources for Bahamian creditors, including contractors, suppliers and other vendors.

Ms Thier yesterday reiterated Mr Izmirlian’s offer to acquire the rights to this litigation, adding that this would be included in his offer.

“Clearly, this would create tremendous value for all creditors,” she said, asking the receivers whether the legal claims were part of the sales process or likely to be sold separately.

Referring to the NDA that Mr Izmirlian is “very reluctant” to sign, despite the receivers’ insistence, Ms Thier accused its terms of “restricting our legal rights”.

She added: “That the NDA concerning a wholly Bahamian process is governed by English law is curious, and lends credence to the argument that the receivers are using the NDA to narrow rights that we would otherwise possess.”

Ms Thier contrasted this with the China Export-Import Bank’s opposition to the Delaware-based Chapter 11 bankruptcy protection process last year, and said: “One might ask what is in the law of the Bahamas that does not adequately support the sales process in your view.”

Warning that “time is of the essence” for both Baha Mar and Mr Izmirlian’s proposal, Ms Thier said: “We can get this project moving well before the end of the year when you otherwise hope, but cannot guarantee, that there would be some kind of buyer in place.

“Perhaps, for your purposes, you can wait until the end of the year even to solidify a potential buyer but, in our view, this does not serve the best interests of the Bahamian people or the viability of the Baha Mar project.”

Yesterday’s letter is merely the latest episode in a major public relations (PR) offensive that Mr Izmirlian and his team have mounted against the Baha Mar sales process, and his former Chinese partners.

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.