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Baha Mar Payouts Tied To Concessions

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s creditor committee has given “a strong indication” that the Government granted greater-than-normal investment incentives to the Chinese in return for payouts to Bahamians.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s chairman, agreed that the language employed by the committee appeared to tie the funding of promised creditor payouts directly to the investment incentives granted to the Chinese for completing Baha Mar.

The creditors committee, in an expanded ‘question and answer session posted on its website, said: “Priority will be given to Bahamian creditors on the basis that the fund[s] has been provided in consideration for concessions and consents from the Government, which must benefit the Bahamian people.”

Prime Minister Perry Christie previously told the House of Assembly that the Government was restricted, both by Atlantis’s ‘Most Favoured Nation’ style treatment and laws such as the Hotels Encouragement Act, in terms of the type and value of the incentives it could grant the Chinese.

As a result, he and others connected to the Government’s agreement with the China Export-Import Bank have argued that the latter received incentives (tax breaks) no greater than the norm for resort developments such as Baha Mar.

However, Mr Bowe said the creditors committee’s statement indicated that “additional concessions” had been given to the bank and China Construction America (CCA), the project’s main contractor, to “facilitate” the payments to Bahamian contractors, vendors and former Baha Mar employees.

“If some of the payments are being made in return for some of the concessions received by the Chinese, the public has every right to know what concessions were granted,” Mr Bowe told Tribune Business.

Confirming that he had read the ‘question and answer’ responses posted by the creditors committee, he added: “It’s a strong indication that additional concessions were granted to facilitate this process [of Bahamian creditor payouts].”

The creditors committee’s statement is likely to revive concerns as to whether it is the Bahamian public, via the Treasury, who will ultimately be responsible for compensating local creditors via the ‘tax breaks’ given to the Chinese.

Contacts close to the Baha Mar construction completion agreement, speaking to Tribune Business on condition of anonymity, have refuted this, echoing the Government line that the investment incentives do not go beyond what is typically granted under the Hotels Encouragement Act, such as Customs duty and ‘border’ VAT exemptions on building materials, fixtures and furnishing.

But, due to the uncertainty, Mr Bowe argued that the Bahamian people needed to be “very demanding” of the Government’s handling of the Baha Mar impasse, and particularly the investment incentives that have now been granted.

He also called for a “timeline” to be published, detailing when various aspects of the Government’s agreement with the China Export-Import Bank are to be publicly revealed.

These documents were ‘sealed’ by the Supreme Court, at the request of the China Export-Import Bank and its Deloitte & Touche receivers, an action that was supported by the Government.

Mr Bowe acknowledged that such ‘sealings’ were “not unusual” in multi-billion dollar transactions such as Baha Mar’s, so that an orderly sales process can be maintained and sensitive commercial data withheld from the public domain.

“There has to be a timeline as to when details are released,” Mr Bowe told Tribune Business, suggesting that aspects of the Baha Mar agreement be ‘unsealed at intervals such as three and six months later, when the need for confidentiality had passed.

“That should be set out so there’s a a reasonable expectation, and we can see whether the benefits [creditor payouts] are justifiable given the level of concessions granted, and vice versa; that the concessions are justifiable by the benefits received,” he added.

“It’s not necessarily an easy equation: A - B does not always equal C. It’s going to come down to people’s perceptions; whether it would have been cheaper for the Government to pay [the creditors] than offer the concessions granted. That’s a very real concern that will have to be addressed in due course.”

Tribune Business previously revealed that the China Export-Import Bank is making “about $100 million” available to pay Bahamian creditors of the Baha Mar group of companies at least a portion of what they are owed.

However, the decision to ‘seal’ all details, coupled with a general lack of trust in the Government and the Chinese, has created considerable public scepticism about the Baha Mar deal and whether it is ‘for real’.

K P Turnquest, the Opposition’s deputy leader, also backed Mr Bowe in arguing that the creditors committee’s statement was effectively an admission of a ‘trade-off’

“It does imply that there’s quod pro quo,” he told Tribune Business. “That line clearly says the Bahamian people are paying. That the bank has allocated whatever dollars they’ve agreed to allocate in return for an agreed amount of concessions to the Chinese.

“That amounts to the Bahamian people bailing out this project again. No matter how you cut it, the Bahamian people are being asked to pay.”

Mr Turnquest added that rather than rescue Baha Mar’s original developer, Sarkis Izmirlian, the Bahamian people were being asked to perform this act for the China Export-Import Bank, an institution owned by the Chinese government.

“Forget Sarkis at the moment; we’re being asked to bail out the China Export-Import Bank,” he said, in reference to the likely investment incentives being offered.

“It’s incredibly important for the Bahamian people to know the value of these concessions being offered quid pro quo, and whether these concessions would receive the approval of Parliament.”

Others, such as Fred Smith QC, have argued that details such as the investment incentives, plus Crown and Treasury land involved in the Baha Mar deal, should have been made public given that they are assets belonging to the Bahamian people.

However, given that the China Export-Import Bank is under no obligation, legal or otherwise, to compensate Bahamian creditors, the Government - and by extension the country - probably has little choice but to go along with its demands to an extent.

James Smith, the former minister of state for finance, one of the five-person committee’s members, also confirmed other disclosures by this newspaper, namely that creditors owed $500,000 or less would likely recover 100 per cent of what they are owed.

He indicated that those owed greater sums, likely less than 10 per cent of Baha Mar’s creditors, may not be ‘made whole’, but would likely receive more than 50 per cent of the amounts due.

Comments

John 2 years, 11 months ago

US Bankruptcy vs Winding Up in Bahamian courts" If Sakis had not been interfered with and was allowed to take Bah Mar Into bankruptcy vis a vis the Delaware courts, things would be findamentally different from they are now: . 1. Bah mar would still be under the control of Sakis and now in the hands of China Bank. . 2. There would be no need to seek a buyer since Bah Mar would still be under original ownership. .3. China Construction Ameria would be out of the picture (and not Sakis) since they were the ones allegedly for not meeting the project's deadlines and doing a lot of faulty and shoddy work that had to be corrected. . 4. Bahamians and other unsecured creditors would be more to the top of the list unlike how they are at the bottom now and the work would have been ongoing and not come to a complete stop as it is now. . 5. Bah Mar would (most likely) been open now and the workers who were terminated would still be employed. . 6 There would be no need for 'gratis' payments to employees and contractors and everyone would most like been paid in full. . 7.China Exim Bank would have been to the bottom of the list and only get paid after the project was up and running. They would not have control over bah mar like they do now. . 8 Since China Construction (America) would no longer be associated with Bah Mar they would have to settle all their claims with their sub-contractors and suppliers. . 9. There would have been less government involvement socially, legally and financially in Bah Mar. . 10. There would be no need for additional concessions and tax breaks, especially with China Bank. . 11.Bah Mar could have been completed at at lest $1/2 billion less than what it will cost today to complete. . 12. The future of Bah Mar is more uncertain now, because although the prime minister says there is one, and yes we have reason to doubt, no buyer has been identified for the property. . 13. The country may now have suffered two credit downgrades, and facing the possibility of at least one more. . 14. The fallout from the whole Bah Mar debacle would be less: the original investor would still be in place, but as it is now Sakis Izmirilian, an investor, for all that is known, had good intentions now stands to lose everything he has invested in Bah Mar. So he appears to the international community as a sheep who has been fleeced in the Bahamas, and with the assisantce of the Bahamian government, whether is was their intentions or not. . 15 Bahamians has lost more all around by winding up bah Mar in this way. They have lost 2-3 years of economic inputs (taxes too), Jobs have been lost, Tax breaks and concessions to bah mar has been increased and the Bahamas' credibility has been damaged both as a tourist destination and a place for foreigners to invest.

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Greentea 2 years, 11 months ago

I am told Izzy has a development in Cuba. He will be fine- we won't.

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Well_mudda_take_sic 2 years, 11 months ago

The funds received (to be received?) from the Export-Import Bank of China (EXIM) are being wrongfully characterized by Perry Christie and his facilitator James Smith as an ex-gracia gift when in fact the funds would not have been received (be received?) if it were not for the all of the very significant additional concessions Perry Christie has promised the Bahamas would give EXIM. You can bet the claims committee led by James Smith will be favouring cronies, friends and other political supporters of Christie......like the Maynard-Gibson family. What we Bahamians really need to find out about are the so called "ex gracias gifts" that the Christie family, the Maynard-Gibson family, Baltron "Bagman" Bethel et al. have received from CCA and/or EXIM for the role they played in the nationalization of the Baha Mar Development for the benefit of Christie's new found Chinese friends.

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Gotoutintime 2 years, 11 months ago

Are People really surprised at this??

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proudloudandfnm 2 years, 11 months ago

We need a commission of inquiry on Bahamar and PLPs must be prosecuted. From Perry down.

That is the only way we will get our credibility back....

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Economist 2 years, 11 months ago

First you need to have the agreement made public, but the Bahamians who have the right to do this (the contractors) are not man enough to do it (they scared) so we won't get a Commission of Inquiry.

Until we stand up nothing will happen.

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