The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fears of new Baha Mar construction delays are particularly ill-timed, the Chamber of Commerce's chief executive yesterday warning: "We don't want that ghost haunting us again."

Edison Sumner told Tribune Business he had been informed by Baha Mar's principals that the dispute which sparked China Construction America's (CCA) warning should have "no material impact" on the $4.2 billion project's opening and future operations.

However, he warned that it was "incumbent" on all parties involved to resolve the matter as rapidly as possible given Baha Mar's history of missed construction deadlines, Chapter 11 bankruptcy protection and acrimonious litigation between the original developer, contractor and financier.

Mr Sumner said CCA's warning that the October 15, 2017, 'substantial completion' deadline had been endangered by a Florida supplier would rekindle unhappy memories of Baha Mar's recent pass.

And, should CCA's fears come to pass, the Chamber chief said the reputational damage for Baha Mar and all involved could be "more irreparable than before".

Mr Sumner said CCA's warning was especially ill-timed given that the international rating agencies, Moody's and Standard & Poor's (S&P), are due in the Bahamas within weeks for their annual assessments of this nation's economic and fiscal strength.

He pointed out that S&P, in particular, had used Baha Mar's delayed opening and economic impact as "a whipping stick" to downgrade the Bahamas' sovereign creditworthiness to 'junk' status, and expressed hope this would not occur again.

Baha Mar and its prospective new owner, Chow Tai Fook Enterprises (CTFE), yesterday declined to comment on Tribune Business's CCA revelations on the grounds that the matter was before the south Florida federal courts.

Robert Sands, Baha Mar's senior vice-president of government and external affairs, said: "Our position is that this is an ongoing legal matter between CCA and one of its vendors, and because it's a legal matter we can't opine on this at this point in time."

CCA (Bahamas) could not be reached for comment, with Baha Mar and CTFE's reluctance to speak understood to be based on fears that anything they say could prejudice the south Florida court case.

Mr Sumner, though, said he had been informed by Baha Mar officials that they were confident CCA's dispute with a Florida-based supplier would not impact the $4.2 billion project's opening plans.

"I'm advised this matter is an isolated case, and our information is it really is a matter between a single sub-contractor and CCA," he told Tribune Business. "I was told it should have no material impact on the opening of the resort and its operations."

Baha Mar/CTFE's position, as relayed by Mr Sumner, is far more relaxed that the fears of 'doom and gloom' detailed in CCA's legal complaint against Source Outdoor over the alleged withholding of 50 per cent of the project's lounge chairs.

CCA, in a lawsuit filed with the south Florida federal court last Thursday, alleges that these 1,420 chairs are "essential to the timely completion" of the Cable Beach development.

It warns that it will be unable to meet the October 15, 2017, 'substantial completion' deadline for finishing Baha Mar's construction unless Source Outdoor is compelled to deliver.

Failure to hit that date, CCA alleges, will expose it to penalty fees of $150,000 per day - rising to $250,000 per day after one month - under the terms of its construction contract with the China Export-Import Bank.

"Even if CCA were to immediately endeavour to purchase replacement chairs, the time required for the negotiation of a new purchase order, for the manufacture of the replacement items and for their shipment to the Bahamas would result in non-compliance by CCA with the 'substantial completion' date, and would subject it to the extraordinarily large liquidated damages provided for in CCA's agreement with Perfect Luck Assets, the owner of the project," CCA alleged.

"Aside from the unmanageable financial burden that would be visited upon CCA were it unable to obtain immediate receipt of the chairs, because of the extremely high level of publicity and governmental attention being paid to this particular project, CCA's reputation would suffer widespread, incalculable and irreparable damage."

Raising the stakes, CCA then filed for an emergency injunction and quick hearing of its case, urging the south Florida district court to order that the 1,420 chairs be "delivered immediately" to its Miami-based freight forwarder for onward shipping to Miami.

"The project for which these chairs are intended is the most significant tourist development in recent years in the Bahamas," the Chinese state-owned contractor said in its Friday legal filings.

"Its completion has been carefully calibrated to coincide with the start of the 'high season' for tourism in the islands. Because of the significance of this project, and the overriding importance of the completion date, CCA is contractually obligated to complete its activities by October 15, 2017.

"Any failure to meet this contractual deadline would result in immediate, irreparable and incalculable damage to CCA's reputation in the construction industry worldwide and within the Government of the Bahamas," CCA continued.

"It would result in unprecedented derogatory publicity at the peak of the tourism season, and the resulting harm to CCA's good name would be irreparable and virtually impossible to overcome."

Despite Baha Mar's reassurances, Mr Sumner said further completion delays - based upon CCA's warnings - were the last thing that the project or wider Bahamian economy needed.

"I think that in our previous meetings with the hotel they'd indicated they were working very hard to meet deadline, and they've enunciated opening dates a number of times, so we're hoping that they'll be able to perform and open at the time they're projecting," he added.

Given Baha Mar's history, which is littered with complaints of three missed construction deadlines by CCA, the Chamber chief executive urged all parties "to move post-haste to ensure any difficulties are worked out quickly".

Warning against any repeat, Mr Sumner said: "We don't want to go down that road again... My advice to the parties would be to all parties concerned to get in a room, work out the differences - whatever they are - rather than go down this road again.

"The damage may be more irreparable than before, and there's a reputational risk for the resort, all those involved, and the country as a whole..... We've certainly had some teachable moments.

"If we're going to come back and have the same ghost haunting us again, it's incumbent on all parties to work this out as quickly as they could so that this project is not saddled for reasons that could be avoided."

Mr Sumner added that the CCA warning had been delivered at "a concerning time", with the International Monetary Fund (IMF) as well as the rating agencies due in the Bahamas within the next several weeks.

They will already be concerned over the Government's $722 million borrowing and higher-than-expected $500 million deficit for 2016-2017, "so it's not a good time to have this activity going on".

"The rating agencies used Baha Mar as an issue in the sovereign downgrade of the country," Mr Sumner told Tribune Business. "We don't want the rating agencies to come back again and use Baha Mar as a whipping stick for the economy and the country."