The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Bahamian businessman and Baha Mar director yesterday blasted as “nonsensical” and “commercially crazy” the instance of a ‘back-to-back’ guarantee from the developer to cover a $400 million refinancing package, arguing that if the China Export Import Bank (CEXIM) insists on the retention of China Construction America (CCA) as the general contractor then it should also insist on a guarantee from its parent or drop the requirement.

Dionisio D’Aguilar, the Superwash president and Baha Mar board member, said that the financing shortfall for the stalled $3.5 billion Cable beach resort was wholly as a result of China State Construction Engineering Corporation’s (CSCEC) wholly-owned subsidiary CCA repeatedly failing to meet agreed completion dates. This, he said, was notwithstanding the fact that it had confirmed often and repeatedly to Baha Mar that it was in possession of all necessary information in terms of design information and the deadlines agreed upon were achievable.

“It would therefore be nonsensical and commercially crazy for Baha Mar to guarantee CSCEC’s obligations as the only party which could cause a call on the guarantee is CCA, CSCEC’s own company, through its non-performance. CSCEC would, in such circumstances, be fully protected from its own subsidiary’s failing,” said Mr D’Aguilar.

“CCA has repeatedly failed to meet its undertakings. Who in its right mind, other than its parent, would or should guarantee a further CCA undertaking? If CEXIM is insisting on the retention of CCA, then CEXIM should insist on a CSCEC guarantee, or drop the requirement. In any event, CSCEC is a co-investor. Baha Mar is prepared to guarantee its corner; CSEC should do likewise.”

Both Baha Mar and CCA have offered to cover the remaining $200 million balance by each contributing $100 million of new money, but it is the bank guarantee on which the financing differences remain. Sarkis Izmirlian, Baha Mar’s principal, has offered to cover $25 million, with the contractor taking up the remainder. CCA 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’ CCA’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.

Mr Izmirlian has stated that construction work on Baha Mar could easily be completed with Bahamian contractors. Baha Mar is said to be 97 per cent complete.

“Baha Mar has offered the alternative of a guarantee, but only if is not again exposed to CCA’s failure to fulfil its undertakings. This is only, and entirely, reasonable. If CEXIM insist on CCA’s retention, then it should take the risk or seek a guarantee from CSCEC. The alternative is on the table, allow Baha Mar to get rid of CCA and receive a Baha Mar guarantee,” said Mr D’Aguilar.

Mr D’Aguilar said that it was odd that the government, acting as neutral intermediary, notwithstanding its commercial relationship with CSCEC on the Colonial Hilton development in downtown Nassau, should be seeking to ask Baha Mar to effectively solely guarantee the obligations of a contractor who has repeatedly failed to meet agreed dates.

“The Baha Mar detractors are so intent on blaming Baha Mar for their failure to make a deal that their love affair with these Chinese institutions is blinding them to the fact that the request for this back to back guarantee by CCA is so disingenious and unreasonable that no savvy Bahamian businessperson would ever make such a commitment in their respective businesses,” Mr D’Aguilar said. “These detractors should focus their efforts on telling China Import Export Bank to either drop the guarantee requirement altogether or China State Construction to drop the request that Baha Mar guarantees its guarantee.”