The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Baha Mar director last night urged the Government to apply equally “sustained pressure” on the project’s contractor, which it has accused of “inflexibly pocketing” all the developer’s settlement concessions but not responding with its own.

Dionisio D’Aguilar expressed optimism to Tribune Business that a negotiated solution to the dispute over the $3.5 billion resort project could be forthcoming if the Christie administration were to pressure China Construction America as equally as hard as Baha Mar.

Such pressure appeared not to have been forthcoming by last night, as Baha Mar’s $2.45 billion debt financier, the China Export-Import Bank, revealed in Delaware bankruptcy court filings that “no consensual resolution” had been achieved by Monday night Beijing time.

Baha Mar’s president, Thomas Dunlap, in a message spelling out the developer’s position on the negotiations pre-Monday, accused China Construction America (CCA) of failing to “negotiate in good faith” and constantly changing positions thought to have been agreed.

The message, seen by Tribune Business, further argued that CCA had demonstrated “inflexibility” despite Baha Mar’s willingness to make concessions to achieve a settlement, which include dropping what it believes is a $225 million claim against the contractor.

“We are increasingly disturbed by a course of conduct during the last two weeks of mediations and negotiations; conduct which rewards CSCEC [China State Construction Engineering Corporation, the contractor’s parent] and CCA for its inflexibility, while disregarding Baha Mar’s efforts and concessions through these negotiations,” Mr Dunlap wrote.

“In short, the ‘negotiating’ process has become deeply flawed in many of its basic presumptions and tenor, and requires urgent course-correction if the parties are to reach agreement.”

When contacted by this newspaper, Mr D’Aguilar said that while he understood that Baha Mar met its Chinese partners this morning to continue negotiations, there was “not much movement” with both sides sticking to their respective positions.

This, together with the tone of China Export-Import Bank’s Delaware court filings last night, indicates that the bank did not accept the proposal by Sarkis Izmirlian, Baha Mar’s chairman and chief executive, for resolving the impasse by the latter’s self-declared Monday deadline.

Tribune Business understands that the $400 million proposal to resolve the dispute, which involved the project ‘divorcing’ CCA as main contractor, was also intended to force the Christie government into the open and make it choose sides: Baha Mar or the Chinese.

“What he’s doing is really calling the Government’s bluff,” one financial executive, speaking on condition of anonymity, said of Mr Izmirlian’s move. “Back me and the Bahamian contractors, or back the Chinese. The Government has a decision to make.”

This impression was not entirely dispelled by Mr D’Aguilar, who told Tribune Business: “Now the Bahamian government has to make a decision: Are they working in the best interests of the Chinese, or are they working in the best interests of the Bahamian people, particularly the Bahamian contractors. That’s the quandry for them.”

The Baha Mar director again suggested that the Government had “emboldened” CCA and the China Export-Import Bank by filing the winding-up petition against the developer, which is scheduled to be heard by the Supreme Court on Friday.

He implied that this had encouraged the Chinese to stall and ‘play for time’, in the hope that the winding-up would be approved and that they, in concert with the Government, could oust the Izmirlian family and its $850 million equity stake from the project.

“It’s almost as if the Government has poisoned the well from which it needs to drink from,” Mr D’Aguilar told Tribune Business.

“The Government’s putting a lot of sustained pressure on Baha Mar, but they’re not applying sustained pressure to the Chinese. They’re not putting sufficient pressure on the Chinese to compromise.

“If the Government would apply sustained pressure to CCA, we could have a deal. I’m convinced that if the Government were to apply pressure on them, and recognises it needs all three parties, get together with everyone in the room and shake some heads, it could have a deal.”

Mr D’Aguilar said achieving a negotiated settlement with both the Chinese contractor and the bank was Baha Mar’s preferred outcome, with the $400 million proposal by Mr Izmirlian a reserve option.

Yet he argued that CCA always “wiggled” when Baha Mar attempted to pin it down on financial figures and, most importantly, a guaranteed construction completion date.

“You can only negotiate with yourself for so long,” he told Tribune Business. “Every time you try to pin CCA down to specific amounts and a deadline, they start to wiggle.

“You try to tie them down to specific financial commitment and, more importantly, try and tie them to specific deadlines, and to incentivise them to hit deadlines you put in penalties. When you put in penalties they start to wiggle.”

Mr D’Aguilar said the successful opening of any new resort depended heavily on hitting the construction deadline, but CCA was also resistant to Baha Mar’s call for it to bring in more expertise and technical staff.

Tribune Business understands that Baha Mar’s negotiating team is being led by Mr Dunlap and Greg Djerejian, its Asia-Pacific president. Both have been empowered by Mr Izmirlian to try and reach a deal.

Yet Baha Mar is complaining that CCA is being represented by lower-level executives from its parent, China State Construction Engineering Corporation, who frequently insist that all concessions/decisions must then be approved at Board level - further delaying the negotiations.

“Put differently, Baha Mar is being characterised as the recalcitrant party whilst the facts reflect otherwise, and we are no longer minded to participate in such an unbalanced, unfair process absent greater respect shown the developer,” Mr Dunlap wrote.

“Baha Mar’s representatives remain available to meet as soon as Monday morning Beijing time if China State Construction Engineering Corporation/CCA engages in a serious, good faith-manner, but not in the context of Baha Mar perennially ‘negotiating with itself’ where CSCEC/CCA pockets the ‘gives’ that are convenient (dropping UK litigation, Disputes Resolution Board, $35 million claims etc) but refuses to respond in kind.”

And, in a thinly-veiled reference to the July 17 letter sent by attorney-general, Allyson Maynard-Gibson, to China State Construction Engineering Corporation’s top executives, Mr Dunlap added: “That such behaviour elicits gratitude from other participants at the four-party negotiations only gives us even graver concern about the ultimate intent of the parties.”