The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s Baha Mar’ liquidation strategy was last night branded as “a gamble” that has backfired on the Bahamian people, costing not just several thousand jobs but placing the entire $3.5 billion in project “in jeopardy”.

K P Turnquest, the Opposition’s deputy leader, told Tribune Business that the decision to terminate 2,026 Baha Mar employees strongly suggests that no commercial resolution to the dispute surrounding the development is “imminent”.

With the joint provisional liquidators struggling to obtain the total $25 million necessary to finance their two-month appointment, Mr Turnquest said it seemed almost a foregone conclusion that the winding-up petition to place Baha Mar into full liquidation will be heard on November 2.

He added that the Bahamas’ problems went much deeper than just Baha Mar itself, adding that “country risk and reputational risk” were now attached to the dispute’s outcome, and the terms and speed with which it was resolved.

“That is the underlying story, I believe,” Mr Turnquest told Tribune Business, when asked if the mass Baha Mar terminations suggested that the Government’s ‘winding-up strategy had failed.

“I believe that the Government has taken a gamble that moving to liquidation would force the developer [Sarkis and Dikran Izmirlian] to acquiesce to their way of thinking, and it has not worked to this point.

“It has jeopardised the whole development, as well as resulting in these job losses.... The whole strategy, I don’t think anyone with any kind of business sense can understand it.”

Tribune Business has received independent confirmation backing Mr Turnquest’s remarks, as contacts who spoke to government ministers and confidants in the immediate aftermath of the early July winding-up petition filing, reported that the Christie administration expected the Baha Mar dispute to be over within weeks.

However, in believing that the threat of winding-up Baha Mar would bring the Izmirlians to heel, the Government underestimated the Swiss-Armenian family it was dealing with - global investors who are used to playing ‘hard ball’ over their investment negotiations to ensure they get the terms they want.

The Government has repeatedly insisted that its winding-up petition strategy was the best way to secure the speediest resolution to the Baha Mar dispute, and pave the way for its construction and completion.

That is now in some doubt, as yesterday’s events will force the developer - whether Mr Izmirlian or a new owner - to begin the staff hiring/training programme all over again, a process that could take months, if not years, further delaying Baha Mar’s opening.

Prime Minister Perry Christie, in a statement last night, said he was “disappointed” by the Baha Mar terminations.

His administration added: “The Government has made the strongest possible representation to the joint provisional liquidators and the stakeholders in this commercial transaction between the developer, Baha Mar, the secured lender, China Export-Import Bank, and the principal contractor and an equity partner, China State Engineering and Construction Company, for the retention of Bahamian staff; meeting outstanding obligations to Bahamian contractors and sub-contractors, funding  (both interim and for completion purposes) and completing the project on mutually acceptable terms as soon as possible.”

Mr Turnquest, meanwhile, suggested the termination move showed that the joint provisional liquidators were having difficulty in obtaining the necessary financing to carry out their assignment, and that a commercial resolution was unlikely to be achieved before the November 2 winding-up hearing.

He added that unless China Export-Import bank came through, it was always going to be “very difficult” for the joint provisional liquidators to obtain the necessary monies, given that virtually no lenders would want to finance an entity in liquidation.

“It says a lot about the joint provisional liquidators in terms of their ability to progress a solution to the current impasse,” Mr Turnquest told Tribune Business of yesterday’s developments.

“Obviously, they wouldn’t be laying-off people if a solution was imminent. Unfortunately, at this point, it looks like the November 2 deadline the Prime Minister has indicated will come, and the next step, unfortunately, will occur. For us as a country, this is going to have some significant concerns.”

Mr Turnquest added that both Standard & Poor’s (S&P) and Moody’s, the former in particular, had emphasised the importance of a successful, rapid resolution to the Baha Mar dispute, and its completion and opening, to the Bahamas maintaining an investment grade rating.

“This is not going to be very good for investment, and when a project of this size fails it puts fear throughout the economy and investing public,” the FNM deputy leader told Tribune Business.

“I imagine the potential problems here are much larger than the Baha Mar issue. This has country risk, reputational risk attached to it. This thing potentially could end up being a very serious blow to the economy.”

Apart from Bahamian investors with multi-million dollar capital outlays tied in investments in Baha Mar’s retail and restaurant concessions, and the huge sums owed to local contractors, Mr Turnquest said the lay-offs could not have been worse timed with Christmas imminent and few alternative jobs available.

He pointed out that Hurricane Joaquin recovery costs were another burden for the Bahamas to bear, and questioned if the latest Baha Mar blow would further impact the Government’s ability to borrow on both the local and international capital markets.