The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $3.5 billion Baha Mar dispute must be resolved within 60 days to prevent the Bahamian construction industry suffering “a financially devastating” impact, a well-known contractor has warned.

Stephen Wrinkle, the Bahamian Contractors Association’s (BCA) immediate past president, urged that any resolution between Baha Mar and its Chinese partners include provisions to pay local construction companies the millions of dollars they are already owed.

While talks to break the deadlock, involving the Government, Baha Mar, China Construction America and the China Export-Import Bank, begin today in China, Mr Wrinkle said there would be “a substantial trickle down” effect for all sectors of the Bahamian construction industry if the impasse was not eliminated within the next two months.

While Osprey is Baha Mar’s most prominent unsecured contractor creditor, via the $5.28 million owed to its joint venture with Yates, Tribune Business understands that multiple Bahamian construction firms are collectively millions of dollars ‘out of pocket’.

Given that many were hired by China Construction America, or its sub-contractors, they do not necessarily appear among Baha Mar’s largest creditors. They instead fall under the $72.6 million owed to the Chinese contractor, or sums listed as owing to other construction firms.

Among the Bahamian contractors understood to be in this position are CGT Construction, Cavalier Construction and Mosko (Bahamas Marine). And if these companies have not received payment, it means they are unable to pay their sub-contractors and professional tradesmen.

“If they [Bahamian contractors] can’t collect, it’s going to have a serious impact and a big trickle down effect,” Mr Wrinkle told Tribune Business. “The trickle down effect is substantial, because if the contractor is owed money, then the sub-contractors and workers are owed money.

“All the way down the chain it’s felt. It’s very difficult when the contractor loses that amount of cash.”

Mr Wrinkle said “much more is at stake” than just the pure dollar figures owed to Bahamian contractors by the Baha Mar project.

With business expenses, overheads and the likes of gas/fuel costs not necessarily included in the contract price, the ex-BCA president said contractors “may be out 20 per cent more than the owner is paying”.

“I know from experience when we were caught in one of these situations several years ago. It’s financially devastating,” Mr Wrinkle told Tribune Business. “You never get it back. It’s gone. Once you lose this, you can’t make it up.

“If you’ve got a large volume of work going on, you can sometimes sustain these hits, but let’s face it; there’s not a lot of construction work going on.

“All those contractors will feel the pinch. It affects the entire industry, materials suppliers and staff. You can’t keep that number of people employed if there’s no profit.”

Mr Wrinkle said the Bahamian contractors working on Baha Mar, most of whom have not been paid since January/February this year, were exposed via their investment in materials, equipment and staff.

He added that lines of credit with the bank might “dry up” for some, and these would have to be converted to promissory notes or a loan.

Likening construction to casino gambling, Mr Wrinkle said: “It’s only when the project is finished and you walk away with the chips that you know if a profit was made. We’re going to feel the repercussions from that [Baha Mar].

“Business Licences and fees are all on the gross, and are not interested in what you lost. There’s no help for the risk the contractors have taken. No consideration whatsoever, and that makes it doubly hard.”

Mr Wrinkle said Bahamian contractors had stopped all work at Baha Mar for 30-60 days. If the dispute was resolved within the next month, he estimated it would require another 30 days for China Construction America and others to mobilise, meaning that the total work stoppage would have lasted for between three to four months.

“If we can see them resolve this situation in the next 30 to 60 days, I think the industry will be OK,” he told Tribune Business. “But they have to make provisions to make outstanding payments.

“What are they going to do about them? Are they part of that $300 million outstanding package? How much will it cost to satisfy the existing payables, and finish the project in a timely fashion?

“From all accounts, they’re very close to finishing and they needed $300 million to get there. But the guys are not going to want to come back to work without having some form of payment plan.

“The Bahamian contractors are willing to work with Baha Mar as long as they know they’re secured in some fashion, but they’ve been bitten pretty hard. We can’t really keep on absorbing these kind of hits.”

Mr Wrinkle said his firm had initially sought work at Baha Mar, but pulled out due to communication challenges with the Chinese and other concerns.

“If there’s not some satisfactory resolution this month, it’s going to be incredibly difficult for Izmirlian to salvage it,” he told Tribune Business. “It’s getting to the point where he will have no credibility, and the sharks will start circling.

“I agree with him filing the Chapter 11 notice on his part, but it certainly didn’t sit well with the Bahamians.

“We can’t afford this again. Irreparable damage has been done to the reputation of the country. It’s going to be tough. Everyone has been stung by this.”