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Foreign Creditor Outrage On 2% Baha Mar Offers

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

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.

Comments

Well_mudda_take_sic 1 year, 9 months ago

They need to name Crooked Christie, the Evil Wicked Witch Maynard-Gibson and the Bag Man Baltron Bethel in these legal actions. These individuals were instrumental in the defrauding of the foreign creditors by their corrupt Red China friends!

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Gotoutintime 1 year, 9 months ago

That's why people will stop doing business in the Bahamas--They know they are going to get screwed.

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Porcupine 1 year, 9 months ago

When viewed from afar, it seems as if someone is playing with us. Perfect Luck and Fook You Enterprises. The Bahamian people, excepting the PM, will suffer for this greatly. Be assured that The Bahamas has been sold out. Is this not obvious to anyone who has been following along? Baha Mar could have been a great boon to the Bahamian people and the economy. Instead, it has cost The Bahamas dearly in most every way imaginable. I cannot imagine a greater crime against an entire country than the way in which this Baha Mar fiasco has been handled by this administration. If this were a just world, Christie and his cronies would be in Fox Hill prison.

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BahamaPundit 1 year, 9 months ago

This is abysmal. When is unfairness ever justified? Imagine if Bahamians in the US were treated this way. They would say it was due to racism. Seriously. This is appalling. Our goverment officials are completely arrogant and oblivious if they think the Bahamas will not suffer ten times worse for their treatment of foreigners this way. What goes around comes around. Just wait and see. The countries who's citizens have been cheated may block tourism and financial services from entering the Bahamas. Christie will be remembered internationally for his terrible prejudice and mismanagement in relation to Baha Mar!

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BahamaPundit 1 year, 9 months ago

Also, it seems some Bahamian creditors may have received more than their rightful share. In all honesty, does it seem likely Bahamians were owed 90 million dollars! This seems inflated. I wonder if those who took out bank loans to build out shops put in a claim for the loaned amount and received the full funds and then will continue to retain the lease and shop merchandise when Baha Mar opens. This would mean they could pay back the bank and still own the shop for free!! Something smells about this entire Baha Mar matter.

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Well_mudda_take_sic 1 year, 9 months ago

In the final analysis of the Baha Mar debacle caused by the corrupt PLP government, it will be learned that the $90 million wrongfully distributed by James "Kiss Crisco Butt" Smith directly or indirectly came from hardworking honest Bahamian taxpayers. This is the reason why Crooked Christie, Maynard-Gibson a/k/a Evil Wicked Witch, the duplicitous accountant, Ray Winder, and the accommodating Justice Winder were all quite comfortable in their very twisted thought process that the foreign creditors should be screwed as regards the $90 million 'illegal' payout.

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mookwarrior 1 year, 9 months ago

The part about it being what you would receive in a standard chapter 11 bankruptcy is not accurate if you were an actual employee of the company in default. All employees would have had preferential claims regardless of whether or not they were native.

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realfreethinker 1 year, 9 months ago

Man we are so screwed. It is going to take a generation to extricate us from the shit this plp government has us in WE are fooked,pun intended.

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TalRussell 1 year, 9 months ago

Comrades! Not me say if foreign creditors should get 2% of 50% settlement of monies owed but if James Smith, the Perfect Luck's committee’s chairman settlement offers is going to reference 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 - then the creditors should be provided with the financial details resulting in the "sale" to Chow Tai Fook Enterprises Limited, as they would have been provided by the Delaware Bankruptcy Court.
Maybe, now the foreign creditors being offered 2% on the dollar owed to them will now be given leave to petition the courts to release what has been kept hidden from the public -likes what was sold for what, sold how much, and under what special terms, conditions and concessions, who really is buying Baha Mar?

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TheMadHatter 1 year, 9 months ago

PLP yellow....Chinese yellow....coincidence?

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ConchyJ 1 year, 9 months ago

Well it look like the US expats and vendors will have to resort to social media and protests at the Bahamian consulates in Miami, DC and New York to bring attention to this unfair treatment of US citizens. May we remind you that over 80% of the visitors to the Bahamas are from the US so they all must be made aware so they can spend their vacation dollars in Cuba, Mexico, the BVI and any other place that does not discriminate against US citizens. How sad!!

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