The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A pioneering Freeport-based stem cell therapy provider faces being placed into Supreme Court-supervised liquidation on May 28 over a "wholly unpaid" $12m debt owed to its main lender.

The failure of the Okyanos Centre for Regenerative Medicine has been blamed on a "catastrophic" series of events triggered by Hurricane Dorian's destruction in early September 2019, from which it has never re-opened after its premises suffered damage estimated at more than $2m.

Legal documents filed by the Supreme Court, and which have been obtained by Tribune Business, reveal that Okyanos has yet to "receive the majority" of the proceeds from its Dorian-related insurance claims.

And, with the stem cell provider lacking any "means to generate revenue", its problems were worsened by a legal dispute that erupted with its landlord at Freeport's First Commercial Centre after it served notice of its intention to terminate the lease on October 25, 2019, due to the facilities being "unfit for occupancy".

The landlord obtained a Supreme Court Order, during a hearing where only itself was represented, on October 20, 2019, that prevented Okyanos from removing almost $3m worth of medical equipment from its facilities as the two sides squabbled over the amount of damage caused by Dorian, who should be responsible for repairing it and allegedly unpaid rent.

The First Commercial Centre was owned by Premier Commercial Real Estate Investment Fund, an investment fund created by former Grand Bahama Port Authority (GBPA) chairman, Hannes Babak, but which was delisted from the Bahamas International Securities Exchange (BISX) in 2018. Mr Babak is still thought to retain an ownership interest in the property, and attorney Andre Feldman, who frequently acts for him in legal matters, sits on its Board as well as appearing in legal filings related to the dispute with Okyanos.

According to legal filings, the landlord/tenant dispute was "stayed" on February 10 by Justice Indra Charles agreeing to the appointment of Cheryl Simms, an accountant at Kikivarakis & Company, as provisional liquidator for Okyanos. This automatically halted all legal actions against the stem cell provider, with the judge also setting aside the previous Order obtained by First Commercial Centre to prevent the medical equipment's removal.

Should Justice Charles approve the full winding-up/liquidation of Okyanos in two weeks' time, First Commercial Centre will have to stand in its place in the creditors' queue with any claim for unpaid rent. The medical firm's main secured lender, British Virgin Islands-based LS Enterprises, would have first call on any assets with its $12m claim.

The winding-up of Okyanos, though, would represent a blow for Bahamian economic diversification just at the moment when the country most needs it amid the crisis caused by the COVID-19 crisis. For it offered a pioneering treatment and represented one of The Bahamas' first tangible forays into medical tourism.

One former patient, speaking on condition of anonymity, said: "It's a big blow to Freeport. It was beautiful in there. The equipment was very, very nice. It was the most beautiful clinic I'd ever been in. I've never seen anything like it in my life. The hurricane messed them up."

Setting out the rationale for its actions, LS Enterprises said in its winding-up petition that Okyanos had occupied 14,807 square feet over two floors at the First Commercial Centre since opening in October 2014. It offered "regenerative medicine" based on stem cell therapy techniques, and received some $15m in debt financing from the BIVI company - some $12m of which allegedly remains unpaid.

Noting Hurricane Dorian's "catastrophic" impact on Grand Bahama generally, LS Enterprises alleged of Okyanos: "Substantial amounts of water and wind penetrated the company's premises causing major property loss and damage. This was exacerbated by a failure of the landlord [First Commercial Centre] to shut the storm shutters on the company's premises prior to Dorian's arrival.

"Additionally, a lack of consistent electricity and air conditioning resulted in extensive mold contamination in the company's premises and operating facilities. The company attempted to mitigate loss and damage by moving equipment and supplies to a climate-controlled storage and preparing for mold remediation, but that was hampered by the Landlord whose servants or agents instructed Company's personnel to cease and desist from such activities."

With no revenues coming in, and all business activity having ceased, Okyanos gave First Commercial Centre notice of its intention to terminate the lease within 60 days due to the building being "unfit for occupancy". Tamecko Collie, a quantity surveyor with The QS Centre, estimated total repair costs to Okyanos' facilities at $2.069m.

First Commercial Centre responded five days' later by serving notice of its intent to challenge the termination, and obtaining the Order to prevent Okyanos removing its equipment. "This restraint further prevented any remediation efforts involving the removal of the company's equipment," LS Enterprises alleged in its winding-up petition.

"The company filed claims for damages with its insurance carriers for losses arising out of the hurricane, but has not received the majority of any such insurance proceeds. The company has insufficient funds to secure a new lease for facilities in which to treat patients; arbitrate with the landlord to recover the company's equipment and supplies; or conduct a marketing campaign to attract patients to The Bahamas following the devastation of the hurricane.

"The company has no means for generating revenue in the foreseeable future or to borrow funds to sustain its operations or to pay its debts as they become due other than to seek additional lending under the facility agreements."

LS Enterprises declined Okyanos' request for additional loan financing on November 13, 2019, on the grounds that the stem cell provider was in default on its existing facilities. Without any prospect of being repaid the monies owed, the BVI entity is arguing that the company is insolvent and should be wound-up under Supreme Court supervision.