The Tribune

THE town went into shock Monday with the surprise announcement by Baha Mar that it has started the process of going into voluntary bankruptcy under Chapter 11 of the US Bankruptcy Code.

To many Bahamians who have been encouraged by their politicians to believe that their future, and the future of this country depended on the opening of the doors of the $3.5bn Cable Beach resort, the news was like the tolling of the Doomsday bell.

However, although it looks like the end of the road, it might yet be the first glimmer of hope at the end of a long tunnel.

It’s probably the toss of the dice, but at least it is a bold, last ditch stand to circumvent the efforts of a contractor who seems determined to make the development fail, and the financing bank that shows no inclination to encourage the contractor to complete the job.

What we find interesting is that when the Export-Import Bank undertook the $2.4bn funding of the project, it was on condition that China State Engineering Corp would be the general contractor. China State also has a $150m equity in the development. Often described as the “lynchpin” between the developer – Baha Mar Ltd of which Sarkis Izmirlian is chairman and chief executive – and the contractor, it seems strange that the bank has taken a hands off approach to the inactive contractor.

Is it possible that the project will be delayed for so long that the developer will be financially drained and forced to withdraw from the contest? And then what? As we have already suggested in this column, the only owner left standing would not be a private investor, but the Chinese government — the People’s Republic of China.

This possibility was raised in the House of Assembly on November 10, 2010, when then prime minister Hubert Ingraham was speaking on the resolution for the Baha Mar project. It was then that the question of a foreign state owning Crown land came up.

“It is the view of my government,” Mr Ingraham had replied at the time, “that it is an untenable position to permit any foreign State to own land in The Bahamas. Under the law, any financial institution providing funding for a development in The Bahamas has a number of alternatives to protect their interest should that project fail. One of these protections is foreclosure. As I said at my press conference on Sunday past, should this project not succeed, and I have no reason to believe that it will not, and should I be in the position that I now hold, my government would not agree to foreclosure on these properties (previously Crown Land) to any foreign State or any entity which is owned by a foreign State.”

Fortunately, in the 2007 election Mr Christie’s PLP government was voted out of office and the FNM, under Mr Ingraham, was returned. Left unsigned before the election was the 2005 Heads of Agreement reached with Baha Mar by the Christie government. This agreement contained certain “confidential” clauses, which presumably would have been election dynamite should they have been revealed before the 2007 election. It was speculated at the time that that was probably why the final Baha Mar agreement was not signed by the Christie government before the election. However, the agreement would have been signed after the election if the PLP government had been returned at the polls.

Mr Ingraham was severely criticised by the Christie opposition for reviewing and amending all of the PLP government’s agreements before finalising and signing them. Fortunately for the Bahamas, Mr Ingraham ignored the criticisms and reviewed the contracts.

As a result, in the final Baha Mar agreement he retained for the Government the Development Bank Building, the Gaming Board Building and the portion of West Bay Street and the median previously agreed for sale to Baha Mar by the Christie government.

He also reduced the area to be used for Baha Mar back-of-house facilities on Gladstone Road from 70 acres to 50 acres and provided for the land to be leased and not sold to Baha Mar.

He required that the 99.78 acres of Water and Sewerage land be leased to Baha Mar and not sold as originally agreed in the 2005 Agreement.

He also preserved 71.40 acres of wetlands owned by Baha Mar as a “No Build Zone” for public use in perpetuity. Also in the 2011 agreement he enhanced the financial benefits for the government and reduced concessions granted by the 2005 Heads of Agreement.

So today’s news, although it has sent shocks waves throughout the community, is a bold, last ditch effort to save Baha Mar for the investor and the Bahamian people.

Provided our Supreme Court approves the US court orders, Mr Izmirlian will regain control of the project, “put in place a viable capital structure and working relationships to complete construction and successfully open Baha Mar”.

“In fact,” said Mr Izmirlian, “after the general contractor made a guarantee to us in November 2014, and then again in January 2015, that Baha Mar would be able to open in its entirety on March 27, 2015, we undertook all preparations necessary for this promised opening date, including significant hiring and training of nearly two thousand employees and purchasing of goods and services. Indeed, even when we subsequently found out that the March 27 deadline was not feasible because the general contractor had still not completed construction, rather than simply downsizing, we maintained our employment levels in anticipation of a revised opening date, utilising our financial resources to pay employees to continue their work at the project and participate in volunteer activities around the island for the benefit of the country.”

Mr Izmirlian said he is committed to do all that he “realistically can to move Baha Mar forward to be completed and opened successfully. I am confident,” he continued, “that, once opened, Baha Mar will be a world-class destination resort that will attract guests from around the world and serve as a key economic spark plug to The Bahamas. The Chapter 11 process provides the appropriate venue to create a viable financial structure that places Baha Mar’s interests foremost.”

The Tribune has given in depth coverage to this news in hopes that our readers will understand, and do all that they possibly can to cooperate with the investor to open Baha Mar’s doors to the world.