The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE FNM’s deputy leader has expressed concern that Atlantis’s ‘Most Favoured Investor’ status, and the Bahamas’ economic sovereignty, could be jeopardised by the Chinese state’s takeover of Baha Mar.

K P Turnquest told Tribune Business that the Bahamas had to be concerned “about the concentration of tourism product in the hands of foreign state-owned entities”, after the China Export-Import Bank on Friday appointed its own receivers to seize control at Baha Mar.

The move means two of New Providence’s leading resorts are now owned/controlled by Chinese state-owned entities. For the British Colonial Hilton, and the $250 million development, The Pointe, are owned by Baha Mar’s contractor, China Construction (America).

That company, and China Export-Import Bank, are owned and controlled by the Beijing government. And, in turn, the Chinese state has a close relationship with Hong Kong-based Hutchison Whampoa, which owns the Grand Lucayan - Grand Bahama’s largest resort.

Mr Turnquest, speaking in the wake of Deloitte & Touche’s Supreme Court-authorised appointment as Baha Mar receivers, said: “We have the concern about the concentration of tourist product in the hands of a foreign state-owned entity.

“We have to be concerned about what that means about the extent of economic control over New Providence and the Bahamas.”

Asked whether Atlantis should be worried about the competitive threat posed by the Chinese, Mr Turnquest replied: “Yes, absolutely.

“They would have to be concerned about that, and what that means in terms of the ‘Most Favoured Nation’ status they have, and what it means in terms of resources this project [Baha Mar] may bring to the market, being state-owned.”

All Atlantis’s agreements with the Government contain a ‘Most Favoured Nation’ clause, which stipulates that the Paradise Island resort can be treated no less favourably that any other investment project in the Bahamas.

It means that any new or unique incentives/concessions granted to another investor must automatically be extended to Atlantis, too, thus ensuring the Government remains in compliance with the ‘Most Favoured Nation’ clause.

Mr Turnquest, though, is suggesting that China’s new dominance over New Providence’s tourism product could give it the clout to secure better incentives from the Government - making its properties the ‘most favoured’ in the Bahamas and violating the provisions in Atlantis’s agreements.

He is not alone in his concerns, as ex-deputy prime minister, Brent Symonette, previously told Tribune Business that the Chinese could use their ownership of three separate New Providence resort properties to ‘squeeze’ Atlantis via tactics such as a simultaneous lowering of all room rates.

Mr Turnquest, though, conceded that China Export-Import Bank’s ‘takeover’ at Baha Mar via the appointment of receivers was “the only real, viable option left” to ensure the development was speedily completed and opened.

Suggesting that this was what Prime Minister Perry Christie was alluding to in his recent expressions of ‘optimism’ that the Baha Mar saga will be resolved shortly, Mr Turnquest said it was “no surprise at all” that the China Export-Import Bank had acted on the remedies open to it following the developer’s loan default.

“It’s the only real, viable option left, or the last hope we had,” he told Tribune Business. “The next step is hoping this move puts the bank in control of the development. Hopefully, they will finance completion of the project or put it in a position to complete.

“I believe that the receiver will have the ability to complete the project without regard to Mr Izmirlian. That will obviously take a bit of the impediment out of the issues that have been holding it back.

“The bank is exercising its rights, and so presumably they have agreed to complete the funding for the project, as it’s in their best interests. Quite frankly, I think it’s the best option,” Mr Turnquest added.

“I think this probably gives the project the best opportunity to be completed without interference. Izmirlian can file whatever claims he wants to file, but I’m sure that based on the history of this project, that will fall on deaf ears.”

While it is in all parties’ interests to complete and open Baha Mar in the shortest time possible, Mr Christie has estimated the construction costs alone at $600 million - a figure that will add considerably to the debt load, and reduce the project’s prospects for turning a profit.

The receivers’ appointment also likely means that developer Sarkis Izmirlian, and his family, have lost all hope of regaining ownership control at Baha Mar. Their $850-$900 million equity investment will also be gone.

Mr Turnquest, meanwhile, acknowledged that Mr Izmirlian’s ouster “leaves a bad taste”, and that the Baha Mar saga had damaged the Bahamas’ reputation among international investors.

“It’s very unfortunate that the developer finds himself in the position he’s in,” the Opposition deputy leader and finance spokesman told Tribune Business.

“The fact he’s not going to be able to see this through is going to be terribly disappointing to him, and it leaves a bad taste as to the concern we have as to what reputational hit the Bahamas will take as a result of all that has gone on. It’s unfortunate that he will not be able to see his vision to completion.”

Mr Turnquest said he believed that “as part of the deal” with the Government to appoint its own Baha Mar receiver, the China Export-Import Bank would pay 100 per cent of the claims owed to Bahamian creditors.

That includes some $74 million owed to 120 Bahamian construction companies alone, but the FNM deputy said: “I’m sure there is a quid pro quo that they will take care of the Bahamian contractors.”

He added that the retail, restaurant and supply contracts held by Bahamian investors and companies were likely to “get renewed and renegotiated”.

“Unless there is something untoward that the receiver finds, they’re going to move forward,” Mr Turnquest told Tribune Business. “It all depends on the successful completion of the construction.

“The receivership brings the best opportunity for that to happen in a reasonable period.”

Mr Turnquest estimated that Baha Mar’s construction completion was at least six months away, even though the project is supposed to be 97 per cent complete.