After all the legal manoeuvres, rhetoric and agreements, Richard Coulson doubts any progress has been made on the stalled mega resort . . .
With all the noise in the market we have got to buy the fish and accept that the Prime Minister has negotiated a deal, however sloppy and incomplete it may be, that just might rescue Baha Mar - and with it, the Bahamian economy and a final Moody’s downgrade.
Based on what we’ve been told, it’s a pretty strange catch. We see the prime lender, the Export-Import Bank of China (CEXIM), agreeing to put up $100m for Bahamian claimants. But who knows how much more to complete the huge project so it’s fit to open? Figures like $300m up to $1bn are thrown like chips around a roulette wheel. And the bank still wants to recoup its $2.5 billion loan.
What’s amazing is that all these bucks are on the table with no news about one key fact: who will be the new owner/operator of the project, without whom all the lofty towers will remain a pile of dead concrete and re-bars? Still buried under the secrecy sealed by our Supreme Court, the Prime Minister only says that it’s a “very delicate matter still being negotiated”.
In blunter terms, no deal has yet been agreed. All the hard issues are still floating: Purchase price or lease arrangement? Terms of operating agreement? Brand name for marketing? Concessions? Above all, has the purchaser’s name been cleared by Government? Or is it the reputed billionaire Macao gambling mogul whose image would taint us?
We regret that Jerome Fitzgerald has had to spend six weeks of sleepless nights negotiating for his admiring mentor Perry Christie (does he keep a bed at the Education Ministry for late duties there?) but the “trust” he ardently seeks will only be granted when Government chooses to reveal what is really under the blanket, and when payment of the $100m is actually made by the promised September 30 date.
We can be grateful that at least Bahamian employees, contractors and businesses see money down the road. But that should not blind us to history, to the incompetence and favouritism that have plagued the Government in its handling of Baha Mar ever since June 29, 2015. On that date, the company sought protection from creditors under Chapter 11 of the US bankruptcy code, putting itself under the jurisdiction of the American federal courts. Our Government fought that motion tooth and nail. Naturally, the US District Court would not accept the case unless the Bahamian court, exercising its usual comity, agreed to co-operate.
But Justice Ian Winder of our Supreme Court faced two bitterly fighting applicants - Sarkis Izmirilian’s Baha Mar arguing for Chapter 11 v the Chinese arguing against. The deciding vote was cast by Attorney General Allyson Maynard, who threw our Government’s weight on the Chinese side. The die was cast: Justice Winder had no choice but to rule with the 2-1 majority, and the US courts had to decline jurisdiction.
The Prime Minister grandly declared that the Bahamian legal system would swiftly and efficiently resolve all the issues and get Baha Mar back on track, using our own procedures for liquidation and winding up, and our own appointed liquidators.
Here we are, 14 months later, with not one issue finally resolved. We are no further ahead than if the Chapter 11 process had been allowed to proceed.
Instead of the tried and true system of a US Court-appointed trustee supervising a detailed, carefully negotiated, reorganisation plan, we have seen impotent local liquidators appointed, then receivers for the bank’s interests, and finally an ad hoc credit committee of five newly chosen individuals, all new to the case and one with a serious conflict of interest. Fourteen months have been wasted.
What was the true reason that our Government fought so hard to defeat Chapter 11? The Attorney General claimed it would impinge on our “sovereignty”, a laughable argument directed at the lowest level of populist chauvinism. At the time and right up to date, political mavens like Progressive Liberal Party (PLP) Chairman Bradley Roberts have claimed that petitioning for Chapter 11 was somehow an insult to Bahamians and, even worse, that it was simply a ploy to consolidate more power in the hands of foreign owner Sarkis Izmirlian at the expense of suffering citizens - a patently absurd charge. Under Chapter 11 (amply explained on the Internet) supervision of the estate is immediately transferred to the District Court, which must follow detailed procedures for protecting all claimants equitably, from the mighty Chinese bank to the lowliest Bahamian employee, as well as the equity owner.
Mr Roberts has even accused Mr Izmirlian that the $80m he initially proposed to pay employees was a sham, charging that he never had the money to do so. In fact, the whole Chapter 11 process was cancelled (at the Bahamas Government instigation) before he could execute his offer. There was no bluff; it was well known that the Izmirlian family had deep enough pockets. Government simply did not want Izmirlian cash a year ago, even for hard-working Bahamians, if that allowed Sarkis to stay in the game.
The legal blockage was simply part and parcel of the campaign of personal vilification against Izmirlian led by Ministers Mitchell and Gibson and even joined by rash comments from the Prime Minister himself, and carried on to the present by his obvious mouthpiece, Bradley Roberts, and his colourful organ Bahamas Press. This campaign of abuse against a well-meaning foreign investor must be rare among civilised nations, matched only by President-forever Robert Mugabe’s diatribes against the long-gone white settlers in Zimbabwe, the country he has destroyed.
Perhaps Mr Izmirlian was unwise in conceiving a project of Baha Mar’s grandiose size and design. If so, any possible failure will not be a crime against the Bahamian people, but simply a business misjudgment, fully shared by our Government whose various administrations approved the plans. None of Mr Izmirlian’s detractors mention the frequent reports of his previous staff that he was an excellent employer, imaginative in his directions and sensitive to their needs. That kind of news does not fit their political agenda.
Just a few months ago, Mr Christie, after initial friendly noises, rebuffed without any serious discussion Sarkis Izmirlian’s latest offer to fund the re-start and assume management. It seems clear that at a high level of the PLP, a cold-blooded decision was made, and continues, to throw Sarkis to the wolves because the Chinese might do more for the nation, like (maybe) creating a local bank to trade the renminbi. Our oriental friends, lovely as individuals, fought Chapter 11 because it would leave Izmirlian as technical “debtor in possession” while they wanted the whole hog immediately.
Well, they got it, and after 14 months still don’t know what to do with the costly creature.
Nowhere has it been officially acknowledged that the state-owned construction company known as China Construction America (CCA) made a hash out of building Baha Mar, where it had the plum job of prime contractor with thousands of its own native employees. It’s on record that, through the winter-spring months of 2014-2015, constant meetings were held between owner and contractor to correct obvious deficiencies and get CCA to agree a completion date for a product acceptable to guests. This could never be achieved. With no opening date set, thus no source of income, Izmirlian had to close down. And now, we hear frequent stories of CCA overcharging and stonewalling on paying claims of sub contractors here and abroad. A good citizen?
Big construction projects are always subject to change orders and disputes. I am no expert, but for two years I had, as neighbour, an American civil engineer who worked daily at Baha Mar. Many nights he came home exhausted and dispirited, and threw off his hard hat declaiming “This the worst project of the many I’ve worked on. The Chinese are impossible; they don’t understand building a hotel, make endless mistakes, never admit them and never change their ways.” He was well paid but quit in frustration weeks before the shutdown. That was just one man’s observation, but a pretty acute one, with no private axe to grind.
That is all history, and I agree that we should move on from the past and look to the future. But that immediate future includes rewarding the very same CCA by offering them the completion job at Baha Mar, retained by their cousins, the Chinese EXIM Bank.
There’s a well-known saying that those who fail to study the mistakes of the past are condemned to repeat them. That may well fit Mr Christie’s rescue of Baha Mar.
• Richard Coulson is a retired lawyer and investment banker born in Nassau and from a long line of Bahamians. He is a financial consultant and author of A Corkscrew Life - adventures of a travelling financier.