The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian yesterday made a last-ditch intervention to regain ownership of the $3.5 billion Baha Mar project, offering to acquire the property for a price “in excess” of what both its secured creditor and ultimate purchaser will pay.

Baha Mar’s original developer, unveiling an October 10 letter he sent to the China Export-Import Bank, has submitted another purchase offer that was branded as “superior economically” to all rivals, “and in the best interest of the Bahamas”.

The letter, which was copied to Prime Minister Perry Christie, also took a swipe at the ‘double standards’ with which Mr Izmirlian alleges he has been treated.

Couched in diplomatic language, the document said it was “very surprising” that the proposed Baha Mar purchaser had been discovered outside the formal sales process operated by the project’s receivers, the Deloitte & Touche accounting firm.

Mr Izmirlian, and his BMD Holdings vehicle, argued that they were informed “multiple” times that their offers would only be entertained if submitted through the receivers’ process, yet they - and the China Export-Import Bank, as their employer - appeared to have performed a complete ‘u-turn’ on this condition.

Mr Izmirlian, in his letter to the China Export-Import Bank’s vice-chairman, Liu Lange, said that the ultimate Baha Mar purchaser had been “found outside the receivers’ process”.

“This is very important and surprising,” he wrote. “As you must be aware, we previously were advised on multiple occasions by your receivers that all offers were required to be tendered through the receivers’ process, and the multitude of bona fide offers we have made were not considered because of that.

“In fact, if our offers had been considered, it is very likely that Baha Mar would be open today, employing thousands of Bahamians.”

Mr Izmirlian added that “the potential acquisition of Baha Mar by an unidentified party via an offer outside the receivers’ process” had spurred BMD Holdings to submit a new offer that was “far superior economically, and in the best interest of the Bahamas”.

The new bid, which retains many of the elements of previous Izmirlian offers, pledges to submit “a price in excess” of the undisclosed offers made by both the China Export-Import Bank’s special purpose vehicle (SPV) and the ultimate purchaser.

This appears to be based on the contents of Justice Ian Winder’s judgment in the receivership proceedings, which Baha Mar’s original developer and his attorneys are barred from attending.

Mr Izmirlian’s letter, and revised offer, seem have been sparked by Tribune Business revealing that judgment, which disclosed that Baha Mar’s secured creditor has set up an SPV to acquire the project’s assets ‘as is’ from the receivers.

China Export-Import Bank has been prompted to do this because none of the purchase offers for Baha Mar, including that from the proposed purchaser, have come “anywhere near” to making the $2.45 billion debt it is owed ‘whole’.

The SPV structure will also likely enable the China Export-Import Bank to ‘hide’ any loss on Baha Mar’s sale ‘off balance sheet’.

Because the sums offered by the SPV and the proposed purchaser have not been disclosed, Mr Izmirlian’s offer also does not include figures, only a promise to ‘top’ what they are offering.

A source familiar with Mr Izmirlian’s position described his offer as “a blank cheque”, and added: “Now it’s going to come down to dollars and cents.

“If the bank is actually able to gain more back, they’re going to have a fiduciary responsibility to pursue that option rather than hide their losses,” the source said, speaking on condition of anonymity.

“It’s a much better proposition than anyone has put forward by a mile. He’s [Mr Izmirlian] coming in at a substantially higher price point.”

Mr Izmirlian’s letter suggests that the Bahamas needs his offer, and an operational Baha Mar, more than ever in the wake of the devastation inflicted by Hurricane Matthew.

The original developer’s proposal again pledges to pay “100 per cent of all substantiated Bahamian claims’, plus “all monies owed” to former Bahamian and expatriate Baha Mar staff.

Mr Izmirlian also promises to drop all his legal actions and appeals in the Bahamian courts if the offer is accepted, and pledges that he has

“the full funding necessary in place for such a purchase price”.

Lennox Paton, the Bahamian attorneys for both the China Export-Import Bank and Baha Mar’s receivers, Deloitte & Touche, declined to comment when contacted by Tribune Business yesterday over Mr Izmirlian’s latest letter.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, told Tribune Business he had not seen the letter, and asked this newspaper for a copy, declining to comment further.

However, sources close to the receivership camp suggested that Mr Izmirlian’s latest letter - and offer - was likely nothing more than a publicity stunt.

For despite the seeming optimism of the Izmirlian camp, recent history suggests the latest offer is likely to be greeted in similar fashion to previous receptions - with a stony Chinese silence.

It is clear that the Beijing government, and its two entities at the centre of the Baha Mar saga, the China Export-Import Bank and China Construction America (CCA), the project’s general contractor, have no wish to deal with Mr Izmirlian and are determined to oust him as the developer.

Any deal with Mr Izmirlian would likely require CCA to be removed from the project, a demand that has always been a ‘no go’ for the Chinese, with protection of the contractor’s interests seemingly paramount throughout the past 18-month saga.

The Christie administration, too, will probably be reluctant to entertain Mr Izmirlian, both because Baha Mar’s fate is largely out of their hands and the project appears to be progressing to remobilisation and construction completion.

Many observers are likely to wonder why Mr Izmirlian has left his latest bid to the ‘11th hour’, given that the Government already appears far down the road with the Chinese, given the ‘Heads of Terms’ agreement for Baha Mar’s physical completion and sale.

Former Bahamian employees have already been paid out under this agreement, negating much of Mr Izmirlian’s promise to make all local creditors ‘whole’, while the China Export-Import Bank, as a government-owned policy institution, is under no obligation to deal with him or accept a higher offer.

All this means Mr Izmirlian is likely to remain on the outside looking in at the project that was his brainchild, with further questions arising over whether he has the wherewithal to pull off a Baha Mar purchase.

The October 10 letter does not disclose the identity of his financing sources, a recurring issue that the original developer has yet to answer. Observers have previously suggested that the China Export-Import Bank would have accepted his offers to make it ‘whole’, had money been put on the table.

Still, in calling on the China Export-Import Bank to “put our disagreements of the past year behind us”, Mr Izmirlian set out the bank’s strategy as he saw it.

“CEXIM has purchased the Baha Mar assets via a newly-established company. In essence, CEXIM has taken all the potential viable assets out, including the claim against CCA, and left behind all the obligations,” he wrote.

“It is our understanding that CEXIM then intends to complete the resort construction and proceed with a second transaction to sell the resort to an undisclosed Chinese party.”

Arguing that he offered a better alternative, Mr Izmirlian said: “My team can conclude this transaction with CEXIM with the fewest surprises in the shortest period of time. We can complete Baha Mar with the soonest opening of all other options.

“We are in the best position to re-engage the people of the Bahamas as passionate supporters of Baha Mar and its stakeholders. And we can pay the highest price for the benefit of the bank and all its stakeholders.

“Together, we can move ahead to a swift and mutually beneficial resolution for Baha Mar, which will result in the resort being open as soon as possible to serve the best interests of the Bahamas, as well as the bank. Now more than ever the country, in its time of need, requires us to come together.”