By NEIL HARTNELL
Tribune Business Editor
Baha Mar’s outraged foreign creditors were last night talking of class action lawsuits, after being offered claim settlements as low as 2 per cent of what they are owed.
James Smith, the committee’s chairman, confirmed that the settlement offers were as low as those indicated on documents passed to Tribune Business yesterday.
He emphasised, though, that the foreign creditor recoveries were similar to what would likely have been obtained had Baha Mar gone through the US Chapter 11 bankruptcy process.
And the former finance minister reiterated that the claimants should be grateful for what they were receiving, given that the payments were coming from the $100 million made available by the China Export-Import Bank, which has no obligation to take responsibility for Baha Mar’s debts.
Mr Smith was commenting after Tribune Business obtained documents confirming that some foreign creditors will recover little to nothing of what they are owed.
A Latin American creditor, whose name is being withheld by this newspaper, was offered a small four-figure sum as compensation for a debt confirmed as being in the high five-figures. This worked out as equivalent to $0.02, or two cents, out of every dollar owed.
The settlement offer, which was only received this week despite being dated November 20, 2016, was accompanied by a ‘Deed of Assignment’ stipulating that foreign creditors must transfer the rights to their full claim to Perfect Luck Claims Ltd. That is the China Export-Import Bank’s special purpose vehicle (SPV) through which the $100 million payout fund is being administered.
“The Settlement Sum will be paid to you in return for the transfer by you of your claims against Baha Mar to Perfect Luck,” the letter, signed by Mr Smith, stated.
The Deed of Assignment seen by Tribune Business, which is itself dated November 2, 2016, calls for foreign creditors to “absolutely and irrevocably” assign their full claim to Perfect Luck in return for the measly sum on offer.
“The Creditor shall not commence or continue any legal action or proceedings against Baha Mar in relation to the claim, or seek to file or file any proof of debt or seek to vote or vote in the liquidation of Baha Mar in respect of the claim,” the Deed of Assignment added.
The settlement offers, though, were already igniting foreign creditor fury last night, as several contacted Tribune Business to express their displeasure and consider taking legal advice.
“We, as many others, were royally swindled (for lack of a better word ), and a payment of 3-4 cents in the dollar is insulting,” one creditor, speaking on condition of anonymity, e-mailed Tribune Business.
“We received this ridiculous settlement offer today, but strangely dated November 2016. Did you [Tribune Business] receive any information about any foreign creditors entering into a class action against them? We would gladly be part of this action, if it ever happens.”
Another Baha Mar creditor, based in the UK, upon hearing the news, also asked this newspaper: “Do you know any creditors planning or creditor groups planning action?
“As one of the companies that was left completely unpaid by Baha Mar, I was heartened to see the process of settling claims and the information suggesting that foreign employees and companies that provided services would be reconciled with a “high figure”, but now see we are potentially being offered 3-4 cents in the dollar.”
The danger here for the Bahamas is international reputational damage due to the discriminatory nature of the creditor payout process based on nationality.
The Government’s agreement with the China Export-Import Bank stipulated that the claims of Bahamian contractors and vendors, together with those of the 2,000 former Baha Mar staff, be prioritised, with their foreign counterparts having to stand at the back of the queue.
In effect, foreign creditors are having to fight over the scraps from the $100 million left over by Bahamians, with the payout process run contrary to normal liquidations, where unsecured creditors are treated equally.
However, the Baha Mar payout has been able to operate differently because it is taking place outside the normal liquidation process, with the funding coming from the project’s secured creditor, the China Export-Import Bank on an ‘ex-gratia’ basis.
And, despite the threats of class-action lawsuits, there is likely little tangible action that foreign creditors can take, given that their only alternative course of action would be to reject the settlement offer and make a claim against Baha Mar. It, though, has liabilities that massively exceed assets with no prospect of recovery.
Mr Smith yesterday told Tribune Business that while he “understood the disgruntlement” of the foreign creditors over the relatively low settlement offers, they had to realise the Chinese bank had no obligation to finance the payments.
“That will be what it works out to about, after all the priority [Bahamian] settlements are made,” Mr Smith replied, when this newspaper asked him to confirm the ‘two-four cents on the dollar’ settlements.
“It’s my understanding that it’s similar to the range they’d end up getting if it went through the US courts. Not that we were aiming for that, but that’s how it ended up.”
Acknowledging the anger caused, he added: “It doesn’t hurt to remind the creditors, especially the foreign creditors, of the ex-gratia element to this.
“I can understand, like everyone else, the disgruntlement, but we shouldn’t lose sight of the nature of the payment. I can’t speak for the Government, but I think I can venture a guess that it interpreted its mandate as not to venture beyond its own citizens.”
The Government yesterday said all Baha Mar’s former Bahamian employees had received their full severance entitlement, and added that “more than 90 per cent of all Bahamian creditors have been paid in full, with the balance having received (or having been entitled to receive) significant compensation in respect of their claims”.
Many Bahamians will likely care little as to the fate of Baha Mar’s former foreign employees and overseas creditors, but this nation’s reputation as a safe, attractive destination for expatriates and foreign direct investment (FDI) faces another potential hit.
One former foreign employee told Tribune Business: “I have been waiting patiently for months/years now to receive what is owed to me. I took time to fill out the forms and file them by the date requested (twice).
“I received confirmation that all claims would be paid out by December 31, 2016. I then received an e-mail all claims would be paid by the end of January 31, 2017. I now do not receive any replies from the claimsspv.net website. The last reply was received on December 20, 2016.”
Another added: “I am a Baha Mar expatriate employee that would just like to know what I can expect. I have been responded to on several occasions with e-mails giving me dates when I could expect action.
“Each time a new e-mail would come on or before that date pushing back that time. The most recent said the committee would make a decision by January 31.
“Repeated e-mails to the committee asking for an update on my claim have been unanswered. I have requested at least a courtesy response with still no response.”
Mr Smith yesterday estimated that more than $90 million in total had been paid out to Bahamian creditors, and said of the offer to their foreign counterparts: “It’s something.”
He added that the payout committee had held its last meeting, with its final instructions being to make the foreign creditor settlement offer and pay those who accepted.
“There are no more deliberations that we really need to go over,” Mr Smith said.