The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Baha Mar director believes Friday’s Supreme Court ruling is “proof in the pudding” that the Government’s winding-up strategy has failed to achieve its goals, and has only created “more confusion and uncertainty”.

Dionisio D’Aguilar told Tribune Business that Justice Ian Winder’s decision to appoint joint provisional liquidators for the $3.5 billion project, but delay hearing the full winding-up petition for two months, was “probably the best outcome” that Baha Mar could have expected.

He suggested that the judge had “straddled the fence” in his ruling, delivering a verdict from which all sides could claim a victory of some kind.

But Mr D’Aguilar said it was “scary” that, to-date, Baha Mar’s Chinese partners had yet to reveal their intentions as to how they wanted to move the project forward.

With Baha Mar the only party to have done this, via its Chapter 11 reorganisation proposal filed in the Delaware Bankruptcy Court, Mr D’Aguilar called on both the China Export-Import Bank and China Construction America (CCA) to disclose how they planned to resolve “this fiasco”.

And he again criticised the Christie administration’s strategy, arguing that the winding-up petitions it - and its various agencies - filed against Baha Mar had “failed” to achieve the Prime Minister’s stated objective - a speedy resolution to the dispute, followed by swift construction completion and opening.

“I still go back to the fact that this is an enormous diversion and huge waste of time,” Mr D’Aguilar said of the winding-up petition. “They’ve tried it, and it’s failed.

“The proof is in the pudding. It’s not speeded up the process; it’s not brought about a speedy resolution. All it’s done is confuse and create uncertainty.

“The uncertainty is causing the management team to melt away, justifiably so, as they do not know how it’s going to turn out or whether they’ll get paid. It’s a bloody mess.”

Mr D’Aguilar suggested that the Government’s decision to take the winding-up route had achieved the opposite of the objectives stated by Prime Minister Perry Christie in his early address, and had “delayed even further” a resolution to the dispute.

“The proof is in the pudding,” he reiterated. “Three months have gone by, and the winding-up still has not been heard. They [the Government] started this ball rolling, and don’t know how to get out of this.

“Why are you getting into the middle of a commercial agreement? Let the parties work it out between themselves. They drink so much Kool-Aid in that Cabinet room. They believed it was the best approach and way to get the fastest resolution.

“But the winding-up petition won’t be heard until November 2, and they will haggle over that. The Government needs to come to its senses and get out of the way. Everybody else sees it, but when they get into that Cabinet room, they don’t. It’s a nightmare.”

Mr D’Aguilar warned that the winding-up petitions, and the provisional liquidators’ appointment, created “a huge risk” that SLS and Grand Hyatt would join Rosewood and all three hotel brands would seek to abandon the project.

It would also jeopardise “all commercial agreements” signed by Baha Mar, including those with Bahamian-owned restaurant and retail tenants, which were currently enjoying some protection via the Chapter 11 filing.

“This is why the winding-up is so stupid,” Mr D’Aguilar told Tribune Business. “It allows all the commercial agreements, all the time and effort that’s gone to getting them in place, to melt away.

“The Government needs to swallow its pride. It never admits mistakes, but it should concede that the whole process of Chapter 11 would have speeded up the resolution and the project moving forward.

“They need to get out of the way and let Chapter 11 work its way through. If they had, this would be well on its way to resolution. But we now have two competing court actions.”

Justice Winder on Friday even struck-out the Government’s original winding-up petition, claiming that Baha Mar owed it almost $59 million, on the grounds that the move was “grossly irregular”.

He also dismissed the individual winding-up petitions by the National Insurance Board (NIB) and the Water & Sewerage Corporation on the grounds that they could not be counted as creditors because they were not parties to the project’s Heads of Agreement.

Justice Winder, though, ruled that the $26 million-plus claim by the Bahamas Electricity Corporation (BEC) and petition by the Treasurer were valid and could proceed.

He also dismissed arguments by attorneys for the Government that the appointment of joint provisional liquidators was “in the public interest”.

The Supreme Court judge did, however, agree to appoint Bahamian accountant Ed Rahming, a partner in KRyS Global (Bahamas) as Baha Mar’s joint provisional liquidator with two UK accountants, Mark Cropper and Alastair Beveridge of AlixPartners Services.

Their powers, though, have been limited by Justice Winder to merely preserving and maintaining the $3.5 billion project’s existing assets over the next two months.

And, in pushing back the hearing on the winding-up petition until early November, Justice Winder (depending, perhaps, on what happens in Delaware) has given Baha Mar, its Chinese partners and the Government an extra 60 days to negotiate a commercial, out-of-court settlement.

Friday’s ruling effectively gives all sides a little something, allow the Government and Baha Mar, in particular, to save face and each claim a victory.

From Baha Mar’s perspective, it has staved off - at least for the short-term - the threat of a winding-up petition. And its management team remains in place, and in joint control of the project with the provisional liquidators.

It also has some breathing space to both negotiate with the Chinese and focus on the Chapter 11 proceedings in Delaware.

Meanwhile, from the Government’s perspective, Justice Winder has allowed at least some of the winding-up petitions to survive and agreed to appoint joint provisional liquidators.

It will be hoping that this, and the early November hearing date, will act as a ‘squeeze tactic’ and put pressure on Baha Mar’s principals, the Izmirlian family, to reach a settlement.

“I’m not surprised the judge did what he did. I always felt the court was going to accede to the wishes of the Government,” Mr D’Aguilar told Tribune Business, “but it’s good that he’s kind of straddled the fence.

“He’s kind of granted the Government’s wish, but allowed additional time for a solution to be devised. It seems as if this is kind of a decision that’s good for Baha Mar in that it allows them headroom for further thought to go in to how to resolve this mess.

“This is probably the best Baha Mar could have expected. I didn’t think the court would come down fully on Baha Mar’s side and throw out the winding-up petition.”

Mr D’Aguilar conceded, though, that the failure to reach a settlement by August 15 meant that Baha Mar’s completion would not happen in 2015.

“We are in 2016,” he confirmed. “Which month in 2016 depends on what deal emerges. There are many different scenarios.”

Mr D’Aguilar agreed that had the Supreme Court approved the winding-up petition and/or given the provisional liquidators full powers, Baha Mar’s Chinese partners would have been “in the driving seat”.

He called on CCA and the China Export-Import Bank to reveal their dispute solutions rather than battle in court, adding that it was “scary” that Baha Mar was “the only party in this whole fiasco that seems to have a plan”.

The Baha Mar Board member urged the Government to not allow the Chinese to “hijack indefinitely” the process towards resolution.