The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Resorts World Bimini’s original developer has doubled down on claims that its Genting partner “cooked the books” in such a way as to “effectively wipe out” its $25m equity investment in the project.

Gerardo Capo’s RAV Bahamas, in legal filings with the south Florida federal court on Tuesday, asserted that $878m in debt carried on the balance sheet of the resort’s holding company, BB Entertainment, had been “peculiarly structured” by the Malaysian conglomerate so that it would “only become payable” whenever the development is liquidated and wound-up.

This, RAV Bahamas is alleging, would mean that upon Resorts World Bimini’s liquidation all available assets and funds would be upstreamed to pay Genting, its affiliates and other creditors first. Such an outcome, it is arguing, would ensure it never recovers the $25m worth of real estate it contributed to the parties’ joint venture for its 22 percent minority ownership interest in BB Entertainment.

Besides wiping out the value of its investment, RAV Bahamas is also claiming that Genting - by “dumping” more than $600m of “illegitimate debt” incurred elsewhere in its global empire on Resorts World Bimini - will effectively “steal RAV’s land without ever paying any value for it”.

Tuesday’s legal filings are the latest salvo in the spectacular falling-out between RAV Bahamas, headed by Miami-based Mr Capo and his family, and the multi-billion dollar resorts and gaming conglomerate with whom they partnered in 2012 to develop the original Bimini Bay project into Resorts World Bimini.

Genting Americas and its affiliates have vehemently denied all of RAV Bahamas’ various claims and assertions. They, in turn, have accused their minority partner of trying “to extract an exorbitant payment” by mounting a $600m damages claim, while also seeking to “inflict severe reputational damage” on the publicly-listed resort, gaming and leisure group through a series of “baseless” allegations.

RAV Bahamas, though, has this week launched a renewed offensive by claiming that both Bahamian and Florida law permits it to bring a “direct shareholder claim” as the only party set to suffer “harm” whereas Genting and BB Investment Holdings (BBIH), the vehicle which holds its 78 percent majority stake in Resorts World Bimini, will not be damaged at all.

“RAV’s direct claims against Genting are proper, under both Bahamian and Florida law, because RAV is the only entity fleeced by Genting’s carefully orchestrated fraud,” Mr Capo’s investment vehicle alleged. “Genting’s misconduct did not harm BB Entertainment and actually benefited.

“First, BB Entertainment was unharmed by the illegitimate debt that Genting shifted to it because the debt was peculiarly structured so that BB Entertainment would never have to pay it. Genting structured the debt to become due and payable only upon BB Entertainment’s liquidation and dissolution.

“Thus, BB Entertainment is unharmed because it has never paid, and will never have to pay, that debt during its lifetime. Second, the debt actually benefits BBIH because Genting booked 90 percent of that debt as payable to BBIH, even though BBIH did not actually lend that money to BB Entertainment.”

As to the implications for itself, RAV Bahamas then asserted: “RAV is unequivocally the only victim in this case because the illegitimate debt effectively wipes out RAV’s entire contribution, while not harming BB Entertainment and benefitting BBIH.

“After RAV transferred over $25m in real property to BB Entertainment as a contribution for its shares, Genting began shifting over $600m of illegitimate debt onto BB Entertainment’s books. The obligations to pay the debt completely bypass BB Entertainment and, upon BB Entertainment’s death, a liquidator pays BBIH and other creditors before RAV’s capital contribution is paid.

“Thus, because the illegitimate debt far exceeds the value of BB Entertainment’s assets, RAV’s capital contribution will never be paid. In effect, Genting cooked BB Entertainment’s books to steal RAV’s land without ever paying any value for it.”

BB Entertainment’s financials showed that, at year-end 2022, the company was effectively insolvent with some $191.511m in assets dwarfed by $885.176m in total liabilities to produce a $693.665m solvency deficiency. Of the $191.511m in total assets, the majority - $165.254m - represented the value of Resorts World Bimini’s real estate, with its holding entity possessing just under $3m in cash and equivalents.

The majority of BB Entertainment’s liabilities, some $795.452m, was described in the financials as “borrowings” from BB Investment Holdings, the Genting-owned and controlled entity. Some $578.848m of this sum was said to be “interest bearing” at a rate of Bahamian Prime plus 5 percent, which would be 9.25 percent.

However, RAV Bahamas highlighted in its court filings where BB Entertainment’s financials stated there was “no set terms of repayment” for this $795m, with interest due on the borrowed principal being “capitalised as part of property, plant and equipment”.

And a further $83.537m owed by BB Entertainment to “related parties”, including other Genting affiliates, were described in the financials as “interest free, unsecured and have no repayment dates”. As a result, any winding-up of Resorts World Bimini and BB Entertainment would result in any available assets/cash being upstreamed first to BBIH, Genting and its affiliates, leaving RAV Bahamas as “the only victim”.

The latter added: “As of December 31, 2022, BB Entertainment’s total liabilities were $885m, which were primarily composed of $83m purportedly owed to Genting affiliates and $795m purportedly owed to BBIH. 

“Importantly, while BB Entertainment’s 2022 audited financials characterise the BBIH debt as loans BBIH made to BB Entertainment, BBIH did not lend BB Entertainment anywhere near $795m. At least $201m of the BBIH debt was the Bimini Superfast operations debt that Genting’s president, Ed Farrell, already admitted was illegitimate, and which Genting arbitrarily re-characterised as a ‘loan’ from BBIH.

“Not a penny of BBE’s $885m liabilities is owed to a true third-party unrelated to Genting. Genting did this by design.” RAV Bahamas said the two parties’ shareholders agreement allows BBIH to make “non-recourse loans” to BB Entertainment that would only become payable when the latter is wound-up.

“Because these debts have no set repayment terms, they become due and payable at BB Entertainment’s dissolution and liquidation,” Mr Capo, his family, and their investment vehicle argued. “Conceptually, placing illegitimate debt on a company’s books would, at first blush, appear like a harm to that company because it would be responsible for paying debt it did not incur.

“However, under the unique facts of this case, the illegitimate debt placed on BB Entertainment’s books is not a harm to BB Entertainment because those debts are completely illusory as to BB Entertainment. BB Entertainment has never made a payment on those illegitimate debts, and it will never need to pay those illegitimate debts.

“The illegitimate debt is payable only upon BB Entertainment’s death, which ordinarily would mean only the shareholders - who would otherwise be entitled to receive the proceeds from BB Entertainment’s liquidation- feel the debt’s harm. But here only one shareholder, RAV, feels the illegitimate debt’s harm because the other BB Entertainment shareholder, BBIH, stands to collect 90 percent of that debt,” RAV Bahamas added.

“In sum, BBIH is not only unharmed by the illegitimate debt, but actually stands to benefit from it because upon liquidation the shareholders’ agreement’s waterfall provision gives the BBIH debt first priority for repayment. Since the BBIH debt ($795m) alone far exceeds the value of BB Entertainment’s assets, the value of RAV’s BB Entertainment shares are effectively wiped out.

“The illegitimate debt thereby enables Genting and its web of companies to effectively steal RAV’s land, which at the time of its contribution was valued at over $25m.” 

RAV Bahamas in its original lawsuit essentially accused Genting of using its 78 percent majority ownership, plus Board and management control, to conceal how it funnelled hundreds of millions of dollars in liabilities incurred elsewhere in its global empire on to the Bimini resort’s books.

Complaining that this has undermined the value of its investment, while also “depriving” it of expected profits, RAV Bahamas claimed that Genting “has deliberately kneecapped” its attempts to gain a true understanding of Resorts World Bimini’s true financial position by denying “full access” to the property’s financial records and its calls for an independent audit.

Genting Americas, though, has cited numerous legal grounds as warranting the lawsuit’s dismissal in favour of arbitration in The Bahamas. In particular, it is arguing that it is the wrong party to be named as the defendant, instead asserting that BB Investment Holdings (BBIH) is the correct entity. There are also assertions that the claim is time-barred under Florida’s statute of limitations, and that it fails to rise to the standard or level necessary to plead fraud.