The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar yesterday upped the ante in the $3.5 billion dispute by giving notice that it will interrogate its Chinese partners on just one topic - “all communications” between themselves and the Government since the Chapter 11 bankruptcy protection case was filed on June 29.

In a move likely to further strain relations with the Christie administration, Baha Mar yesterday served notice on China Export-Import Bank and China Construction America that it will interview their representatives in eight days’ time.

The August 12 depositions, which will be taken at the offices of a US law firm, will examine both Chinese entities on “all communications between you and the Bahamian government in any way relating to the bankruptcy proceedings”.

The documents obtained by Tribune Business make clear Baha Mar wants access to “documents, writings, notes, oral conversations, conversations or discussions by telephone or by computer, or other exchange of information” between the Government, and its debt financier and contractor partners.

And its production requests include documents and other evidence that may have been exchanged between the financial and legal advisors to both sides, not just direct Government, China Export-Import Bank and China Construction America employees.

Some might consider this a ‘fishing expedition’, but it appears likely that Baha Mar is seeking ‘smoking gun’ evidence proving that the Christie administration has sided with the Chinese against it, and that the two are working together to oust the Izmirlian family as the project’s principals.

Tribune Business has already heard of, or obtained, anecdotal evidence that the Government is working closely with the Chinese companies to resolve the $3.5 billion Baha Mar impasse.

A well-placed source, speaking on condition of anonymity, read out to this newspaper an e-mail that Sir Baltron Bethel, the Prime Minister’s senior policy advisor, sent to Michael Zou, an attorney with the US law firm, Hogan Lovells, on July 23.

Sir Baltron had suggested that a new equity partner, with hotel and casino experience, be brought in to invest in Baha Mar as a way to secure the necessary financing to complete the project and get it open.

However, he suggested that the idea be seen as coming from the China-Export Import Bank, Baha Mar’s debt financier, rather than the Government to avoid any impression that the latter was trying to oust the Izmirlian family.

Reading out the e-mail, because they were not authorised to pass it on, the source suggested Sir Baltron seemed to have copied it to all parties to the Baha Mar dispute by mistake.

“One way to make up the equity shortfall would be for the bank to advance the idea that an additional equity partner, with hotel and casino partners, be brought in,” was the source’s account of Sir Baltron’s e-mail.

“Such a suggestion should preferably come from the bank and not the Government to prevent Baha Mar taking the position that the Government is trying to push Izmirlian out.”

Some $400 million in additional financing is required to complete Baha Mar. The China Export-Import Bank has offered to provide 50 per cent of that sum, or $200 million, but wants that sum to be fully guaranteed by the other parties.

Both Baha Mar and China Construction America have offered to cover the remaining $200 million balance by each kicking-in $100 million of new money, but it is the bank guarantee where the financing differences remain.

Sarkis Izmirlian, Baha Mar’s principal, has offered to cover $25 million, with the contractor taking up the remainder. China Construction America wanted Mr Izmirlian to ‘guarantee its guarantee’ to the tune of $175 million, a demand it dropped to $100 million.

However, Mr Izmirlian is refusing to ‘back stop’ China Construction America’s guarantee with one of his own. This is because he feels it is not fair that the financial burden be placed on him, believing that it is the contractor’s failure to complete on time, and on budget, that has left Baha Mar in this position.

Tribune Business also previously revealed a letter sent by Allyson Maynard-Gibson, the attorney general, in which she expressed the Government’s “profound gratitude” to Baha Mar’s contractor for its role in attempting to resolve the dispute over the $3.5 billion project.

She praised the company’s “essential contributions” at the “marathon meetings” between all parties to the dispute.

“On behalf of the Government of the Commonwealth of the Bahamas, I want to convey our sincerest thanks for your personal participation and China State Construction Engineering Corporation’s essential contributions to this week’s marathon meetings in Beijing,” Mrs Maynard-Gibson wrote on July 17 to top executives at China Construction America’s parent.

Tribune Business warned at the time that the letter was likely to be seized on by observers who believe that the Government is working with, and in cahoots with, the Beijing government and Baha Mar’s Chinese partners in seeking to resolve the dispute over the $3.5 billion project by ousting majority shareholders, the Izmirlian family.

There is nothing in the document that can be described as ‘a smoking gun’ which proves this assertion, but it may add to suspicions harboured by Baha Mar and its principals that the Government has ‘ganged up’ against him.

That was subsequently confirmed to Tribune Business by Baha Mar sources, who described Mrs Maynard-Gibson’s letter as “very revealing”.

Such documents may well have determined the nature of Baha Mar’s examination of its Chinese business partners.