The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Seven Baha Mar companies have now been placed into full liquidation by the Supreme Court, prompting a well-known QC to say he “can’t understand” the legal strategy pursued by original developer, Sarkis Izmirlian.

Justice Ian Winder last week appointed Baha Mar’s joint provisional liquidation team Bahamian accountant Ed Rahming and his UK counterparts, Nicholas Cropper and Alastair Beveridge, as full liquidators of the Baha Mar group entities.

This move effectively means Mr Izmirlian and his family now face the total loss of their $800-$900 million equity investment in the Baha Mar project, which includes land assembled for the 600-acre development.

Wayne Munroe QC, who represents the Gaming Board in its capacity as a Baha Mar creditor, said Mr Izmirlian’s strategy throughout the dispute with his former Chinese partners had left him bewildered.

In particular, Mr Munroe queried why the Lyford Cay-based developer and his family declined in early 2015 to give the ‘personal guarantee’ that would have seen them retain ownership, and Baha Mar completed.

“He has been out for some time,” Mr Munroe told Tribune Business of Mr Izmirlian. “The sad part of it is, at the very beginning they were inviting him to come back in with a cash guarantee and no new money.

“I can’t understand his thinking, and the legal advice he was receiving.”

Following the outbreak of the dispute between Mr Izmirlian and Baha Mar’s general contractor, China Construction America (CCA), several efforts were made to broker a resolution prior to the developer’s Chapter 11 bankruptcy protection filing in late June last year.

With initial estimates of the cost to complete Baha Mar pegged at $300 million, the China Export-Import Bank, as the project’s financier, agreed to extend half that amount provided that Mr Izmirlian and CCA agreed to cover the balance by investing $75 million apiece.

However, a deal foundered on Mr Izmirlian’s alleged refusal to provide a personal guarantee. He, though, was unhappy about the terms and conditions the Chinese wanted to attach to any agreement, while also wanting to ditch CCA as general contractor.

Meanwhile, Scotiabank (Bahamas), which acquired its stake in Baha Mar via a debt-for-equity swap, will also have to write-off its investment. Another ‘equity holder’ is China State Construction Engineering Corporation (CSCEC), parent of CCA, which had invested $150 million in the project by way of preference shares.

The full liquidation of Baha Mar Ltd, Baha Mar Land Holdings, Baha Mar Enterprises, Baha Mar Properties, BMP Golf, BMP Three and Cable Beach Resorts marks another step towards resolution for the stalled $3.5 billion project, with ‘no turning back’ towards the original developer/owner.

In reality, the provisional liquidation had outlived its usefulness in the wake of the ‘Heads of Terms’ agreed between the Government and the China Export-Import Bank for Baha Mar’s construction completion and eventual sale.

Tribune Business previously reported that the joint provisional liquidators, starved of funding and having to play ‘second fiddle’ to the bank’s Deloitte & Touche receivers, were only left in the game because they kept unsecured creditor lawsuits at bay.

Now, with construction set to remobilise and Baha Mar’s assets ‘sold’ to a special purpose vehicle (SPV) owned by the China Export-Import Bank, the continued existence of the Baha Mar companies is surplus to requirements.

Alfred Sears QC, the attorney for the now full-liquidators, told Tribune Business that the full liquidation was unopposed - even by attorneys acting for Mr Izmirlian and his Granite Ventures vehicle.

Mr Sears said the only ‘argument’ concerned who should be the full liquidators, with Ferron Bethell of Harry B Sands & Lobosky, acting for Granite, pushing for two Ernst & Young accountants, Bahamas-based Igal Wizman, and Roy Bailey from Bermuda, to be given the task.

Mr Izmirlian and Granite had sought the duo’s appointment when they petitioned the Supreme Court to replace the National Insurance Board (NIB) as the entity seeking Baha Mar’s winding-up.

However, the Supreme Court rejected this and went for Mr Rahming and his colleagues, knowing that any other appointment would likely increase time and costs because of unfamiliarity with Baha Mar and its issues.

Mr Sears told Tribune Business that the Supreme Court had merely heard the full Baha Mar winding-up petition, which had been put off several times to allow for the various parties to agree how the project was to be completed and sold.

“It was an inevitable step in the process,” he added, “because in our system, unlike the US where you have Chapter 11, when you move for the liquidation of a company, unless you get the petition set aside it ultimately leads to the death of the company. In this case, not even Sarkis says the companies shouldn’t be dissolved.”

Mr Munroe confirmed that the liquidators will be tasked with dissolving and winding-up the Baha Mar companies.

“The liquidators will be tasked with making sure there was no funny business with the companies’ assets over time,” he told Tribune Business, adding that they could take legal action against former directors if this was found to be the case.

“There is a value to formally winding-up, so the liquidators can identify all the assets and liabilities, make sure all are accounted for, and conduct a general investigation so that when the companies go out of existence there are no hidden assets anywhere.”

Mr Munroe expressed hope that the liquidation would take no more than three-six months to complete, suggesting that such a timetable would dovetail nicely with the Government’s intentions for Baha Mar to open by the end of winter tourism season in April 2017.