The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s receivers have set aside $3 million to pay potential preferred creditors of 17 companies that formed the ownership structure created by original developer, Sarkis Izmirlian.

The escrow payment by the Deloitte & Touche receivers is disclosed in notes taken during the December 19, 2016, meeting between Baha Mar’s remaining creditors and the official liquidators.

Ed Rahming, the Intelisys (Bahamas) partner heading the meeting, explained that he and his fellow UK-based liquidators had insisted on the payment as part of the second transfer of Baha Mar assets to the China Export-Import Bank’s Perfect Luck Holdings vehicle.

The $3 million funds are to cover potential claims by preferred creditors - chiefly former Baha Mar expatriate staff - against the 17 companies whose assets were included in the second transfer.

The Supreme Court now has to determine whether any preferential creditors exist, and if they have a superior claim to the 17 companies’ assets than the China Export-Import Bank, Baha Mar’s secured creditor.

Deloitte & Touche, as the Chinese lender’s agents, were only in control of two of the 17 companies, with the other 15 outside the mortgage debenture that secured its $2.45 million construction loan.

Should the Supreme Court determine there are preferential creditors of these 15 companies, it will then have to determine how much each is entitled to and how they are to be paid.

Tribune Business understands a two-hour hearing was held on the matter on January 20, 2017, with another scheduled for February 24.

The creditor meeting notes confirm that the second asset transfer to Perfect Luck consisted of cash, receivables, prepayments and “a share in a boat”.

Mr Rahming and his two fellow liquidators, Nicholas Cropper and Alastair Beveridge of Alix Partners, conditioned their agreement to the transfer on the receivers setting aside funds to compensate any preferential creditors who might be discovered.

“The joint official liquidators conditioned their approval to such asset transfers on the basis that the rights (if any) of preferential creditors of the relevant companies, whose shares or assets would be transferred, should not be prejudiced or adversely affected by such proposed sale and transfers,” the creditor meeting notes said.

“It has therefore been agreed between the joint official liquidators and the receivers that, as soon as is practicable, an application is to be made to the court for a determination as to whether there exists floating charge realisations and, if so the extent of the entitlement of preferential creditors of any one or more of the Baha Mar companies in official liquidation and the additional liquidation companies.... to be paid from such realisations in priority to the debenture.

“The receivers agreed to set aside certain funds for the satisfaction of the claims of preferential creditors (if any).”

Preferred creditors are likely to be former Baha Mar expatriate employees, who were not initially included in the $100 million creditor payout that was funded by the China Export-Import Bank via Perfect Luck. The expatriate staff are only likely to receive the ‘leftover crumbs’ from this process.

Preferential claims, the creditor meeting was told, relate to severance pay, vacation leave, medical insurance and pensions, and any salaries that were being earned four months prior to August 7 last year.

“Questions were raised on the preferential claims carve-out and the source of any payments to the preferential creditors,” the notes said.

“Ed Rahming answered that the matter would be heard in court on January 20, 2017, and if the court’s ruling thereafter was in favour of the joint official liquidators’ position on the preferential claims, preferential claims would be paid as due and based on the availability of assets subject to China Export-Import Bank’s floating charge security.

“An initial sum of $3 million was to be deposited by the receivers as agreed with the joint official liquidators pending the outcome of the court hearing.”

The December 19 meeting also saw a bid by Mr Izmirlian and his Granite Ventures vehicle for the appointment of a creditors committee crushed by the weight of Chinese opposition.

Such a committee represents and protects the interests of creditors when a corporate entity is liquidated, working with the liquidator, but the Chinese were having none of it.

The China Export-Import Bank, which was represented at the meeting, is the major creditor of all original Baha Mar companies by some distance, a position strengthened by acquiring the claims of all Bahamian creditors via the Perfect Luck payout.

Two entities in the Perfect Luck structure, Perfect Luck Claims and Perfect Luck Workout, were also present, the former represented by Deloitte & Touche (Bahamas) managing partner, Raymond Winder, and Charlene Paul.

“Ed Rahming advised on the value of a liquidation committee in a liquidation, how the costs would be covered – by the estate - how votes would be counted based on value, and the impact of a liquidation committee in the circumstances of [Baha Mar] given there was limited asset recovery prospects,” the meeting notes said.

“Perfect Luck Workout proposed that a liquidation committee not be formed. This proposal was seconded by Perfect Luck Claims. Granite Ventures proposed that a liquidation committee be formed.

“Ed Rahming advised that the matter could be put to a vote. However, given that vote values of Perfect Luck Workout and Perfect Luck Claims were known by all to be substantially more than Granite Ventures and the other creditors combined, such a vote was not necessary. It was therefore accepted by the creditors attending that a liquidation committee would not be formed.”