By NEIL HARTNELL
Tribune Business Editor
The China Export-Import Bank is not acting as “a fairy godmother” in agreeing to finance payouts to Baha Mar’s Bahamian creditors, current and former Chamber of Commerce executives said yesterday.
Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, said the move by Baha Mar’s $2.45 billion secured creditor was merely “a business decision” designed to ultimately maximise its recovery.
Arguing that talk of a “goodwill gesture” should be dropped, Mr Bowe said the China Export-Import Bank was seeking to “get back on side” the Bahamian contractors and vendors it needs to complete Baha Mar’s construction by paying them at least a portion of what they are owed.
He was backed by K P Turnquest, the former Grand Bahama Chamber of Commerce president turned Opposition deputy leader, who also described the bank’s decision as “a business transaction”.
“I don’t necessarily believe in gifts from the fairy godmother,” Mr Turnquest told Tribune Business drily.
Both men were speaking out after Baha Mar’s creditor payout committee, featuring representatives from the Government, China Export-Import Bank and China Construction America (CCA), released more details on how the claims process will work.
Of particular note to Bahamian contractors, vendors and former Baha Mar employees are the following aspects, particularly the fact that the committee’s decision on whether they will get anything, and/or how much, is “final”.
- The committee is effectively adopting a ‘take it or leave it’ approach to its dealings with Baha Mar creditors, who will have no room for negotiation on how much they will receive.
It justifies such an approach by arguing that the China Export-Import Bank is under no obligation, legal or otherwise, to compensate any creditor for debts that are owed by the Baha Mar group of companies and their original developer, Sarkis Izmirlian.
“When the committee has completed its work evaluating all of the claim forms that it receives, it will then begin to contact creditors to explain further how much and when they will be paid,” the committee said in a ‘question and answer’ session posted on its website.
“It is at that stage that you will need to decide whether or not to accept any offer that the committee may make to you.
“Please note that the funds for payment of claims is an ex-gratia amount from a settlement between the Government of the Bahamas and the China Export-Import Bank, and is not subject to a normal liquidation process. Therefore, the decision of the Committee is final.”
The committee then helpfully says that any creditor who elects not to accept its settlement offer is free to pursue its claim, and search for remedies, against Baha Mar Ltd.
The only snag, as it points out elsewhere, is that Baha Mar “is insolvent” and has no assets or money to pay its creditors, much less complete the resort project.
And any proceeds from a sale of Baha Mar will likely all go to the China Export-Import Bank as secured creditor, leaving nothing for anyone else.
“All of the assets of Baha Mar Ltd are held as security by the Export Import Bank of China. So when the assets are sold, the entire sale price is to be paid to the bank if it is below the loan amount,” the creditors committee said.
“This will almost certainly mean that unsecured creditors of Baha Mar will receive no recovery from the assets of Baha Mar Ltd.”
In other words, the creditor payout committee is saying that Bahamians have no choice but to accept its generosity and that of the China Export-Import Bank, regardless of whether they are dealt with fairly or ‘made whole’.
Mr Turnquest told Tribune Business: “It seems as if they are saying to contractors or debtors: ‘Take it or leave it, we will decide’.
“It really, truly is a situation where they have you under duress. It’s a matter of whether you take something or nothing.”
- The creditor payout committee also warns that Bahamian creditors may not receive anything, even if they submit a valid claim.
“No. There is no assurance that you will receive any payment at all. No creditor has any legal entitlement to the funds being administered by the committee,” it said.
“However, the Committee has been formed to review claims, and offer payments for valid claims, at the committee’s absolute discretion.”
This confirms that contractors, vendors and former employees are completely at the committee’s mercy when trying to recover sums owed. The committee is dominated by representatives from the two Chinese state-owned entities, plus Deloitte & Touche (Baha Mar’s receivers).
All parties will now have to be held accountable for promises that all Baha Mar creditors owed $500,000 or less, former employees and small and medium-sized businesses, will be ‘made whole’, while those owed greater sums will receive “more than 50 per cent” of what they are owed.
- The creditors committee also says it will assess claims submitted by sub-contractors, who have not been paid as a result of the entity hiring them not receiving due compensation by Baha Mar.
“The committee will also consider claims that you may have against contractors working on the Baha Mar project (excluding China Construction America (Bahamas)) if the contractor has not been paid by Baha Mar and, as a result, you have not been paid,” it said.
Mr Turnquest suggested this would add a further layer of complexity to the creditor payout process, and argued that Bahamian contractors would have to settle with their sub-contractors once paid, or be exposed to legal actions.
“How does that make sense?” Mr Turnquest argued. “If the agreement says that Bahamian contractors or service providers at Baha Mar will be paid, once they are it follows that they have on obligation to pay their contractors. I don’t understand what that means.”
The different treatment being afforded sub-contractors in the Baha Mar ‘creditors chain’ is also likely to strike a raw nerve with CCA’s Bahamian sub-contractors.
They are owed some 78 per cent, or $58 million, of the collective $74 million owed to the Bahamian construction industry for work at Baha Mar. Yet they are excluded from the Baha Mar claims process, and will instead have to negotiate with CCA to obtain compensation.
Meanwhile, Mr Bowe told Tribune Business that the funds being made available by China Export-Import Bank to fund the creditor payouts, said to be around $100 million, were not to be viewed as “a magnanimous gesture”.
He added that the priority for Baha Mar’s secured creditor is to complete the project, then sell it, and in so doing maximise the sales price (its recovery). And to accomplish this, it would require the expertise of certain Bahamian contractors to supplement CCA.
“We don’t need to use terms such as goodwill gesture and positive gesture,” Mr Bowe said. “They’ve [the bank] taken a business decision to complete this, and maximise the value of their sale.
“They’ve made a decision to get the various parties they need to complete it back on side, and the mechanism to do that is to pay them what they’re owed, or a portion of what they’re owed, to come to a happy medium where persons are satisfied with their settlement.
“The China Export-Import Bank is not doing this as a magnanimous gesture; it’s a business transaction. It’s really because of the significance of this project that there’s a constant spotlight shone on it and the decision.”