The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s Beijing-owned contractor and major financier were already treating the mega resort project as “state-owned assets” prior to finally ousting Sarkis Izmirlian as the project’s developer.

Documents filed on Friday in the New York State Supreme Court, as the $2.25bn legal battle between Baha Mar’s original developer and main contractor heats up yet again, reveal how China Construction America (CCA) and the China Export-Import Bank plotted together to ensure Mr Izmirlian was removed.

The “meeting minutes” from a September 28, 2015, encounter at the China Export-Import Bank’s conference room in Beijing also raise questions over whether the process to sell Baha Mar in early 2016 was effectively a sham given that the two Chinese state-owned entities had already agreed that they would “give priority to Chinese companies” in the search for a buyer.

True to their word, Hong Kong-headquartered Chow Tai Fook Enterprises (CTFE) was selected as the new purchaser, with all parties who entered the open bidding process run by the Deloitte & Touche receivers ultimately rejected by China Export-Import Bank, which had agreed to provide $2.45bn in financing to the project when under Mr Izmirlian’s control.

The meeting, which was held just after Mr Izmirlian’s Chapter 11 bankruptcy protection bid had been rejected by the Delaware court, shows just how closely CCA and the China Export-Import Bank co-ordinated their strategy to eliminate Mr Izmirlian ahead of the “five-party discussion” on Baha Mar’s future that was to be held at then-Prime Minister Perry Christie’s offices on October 8, 2015.

The discussion, which was chaired by CCA chairman Guan Qing, and attended by the China Export-Import Bank’s president, Liu Lange, noted: “Regarding the five-party discussion on The Bahamas’ large island resort project to be held in The Bahamas on October 8, since the project owner, Baha Mar Ltd (Mr Izmirlian) has not shown a positive attitude so far, The Export-Import Bank of China and China Construction should maintain a tough attitude and be prepared to deal with any situation that arises when the negotiation fails to reach an agreement.

“The two parties have agreed to exchange the basic conditions and bottom lines of their respective negotiations no later than October 6, Beijing time, and strive to reach a consensus.” This indicates that the two Chinese state-owned entities had pre-planned that any talks with Mr Izmirlian would fail, and were preparing the ground to take over the project via the appointment of Deloitte & Touche as receivers.

“From the perspective of protecting the project assets and avoiding the passive situation of falling into bankruptcy protection once again, China Construction suggested that the Export- Import Bank of China should appoint a receiver to take over the project as soon as possible,” the minutes stated.

“In this way, on the one hand it can actively control the key links of the project restart (such as introducing new equity investors, formulating new completion schedule plans, etc.), and effectively protect the loans of the Export-Import Bank of China.

“On the other hand, starting from the overall situation, generally achieve the goal of maintaining the value of state-owned assets. That is to fulfill the unfulfilled obligations of Baha Mar through the receiver, pay the arrears of the project, and protect the interests of China Construction’s $150m preferred stock. The Export-Import Bank of China said it would consider it.”

When it came to finding a replacement for Mr Izmirlian, the minutes added: “The two parties discussed several possibilities for project equity restructuring and complete liquidation, and basically believed that complete liquidation is a fundamental solution to the project’s problems, which should be actively explored and discussed.

“China Construction would co-operate with The Export-Import Bank to find other possible strategic investors to participate in the deal. The two parties agreed on the criteria for finding new strategic investors. One, guarantee that the value of the loan from the Export-Import Bank of China will not be discounted. 

“Two, be able to assume the responsibility of the major shareholder of the project. Three, give priority to Chinese companies while take into account foreign companies. Four, after the deal goes through, negotiate a loan plan with a lower financing cost with The Export-Import Bank of China. The two parties have agreed to strive to complete the screening of potential investors and put forward a short list before October 8, and start contact with potential investors at the same time.”

Margaret Myers, director of the Asia and Latin America programme at the Inter-American Dialogue think-tank, in an August 1, 2022, analysis given on Mr Izmirlian’s behalf said it was not surprising that the China Export-Import Bank had sided with CCA - rather than Mr Izmirlian - as both entities were controlled by the Beijing government.

In contrast to a conventional lender, she added that the China Export-Import Bank’s main role was to promote China’s foreign policy, economic and geo-strategic interests throughout the world. “The Baha Mar case is not an exception,” Ms Myers wrote. “China Eximbank support for the project was conditioned on the use of a Chinese company (CCA) and amid disputes among key stakeholders, the bank prioritised the interests of the Chinese company and Chinese state.”

Adding that the bank had moved to reinforce its and China’s “budding relationship with the Government of The Bahamas”, she added: “China Eximbank was in regular private communication, and appears to have closely collaborated with [CCA] about the project.

“Baha Mar Properties (Mr Izmirlian), though the owner and day-to-day manager of Baha Mar Ltd, the owner of the project, was apparently excluded from these discussions. In these discussions, China Eximbank and defendants referred to the project as property of the Chinese state, or ‘state-owned assets’.

“This view is supportive of what many scholars have labeled ‘China Inc’, or a model in which Chinese companies, state-owned banks, and government agencies work in concert to support China’s broader economic and policy aims.”