The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent businessman has warned that international lenders may refuse to extend credit to Bahamas-based companies and developments were Baha Mar’s Chapter 11 bankruptcy reorganisation to succeed.

Franklyn Wilson, the Sunshine Holdings chairman, told Tribune Business there was “a risk” that financial institutions would shy away from lending in this nation due to uncertainty over whether they would be able to enforce/collect on Bahamas-based security for those funds.

He argued that these were implications resulting from Baha Mar’s Chapter 11 bankruptcy protection filing that the Bahamian business community needed to be “mindful” of, given that access to credit was “fundamental to our economy”.

Mr Wilson told Tribune Business: “I’ve asked some business leaders what would be the typical attitude of businessmen in this country if any Bahamian company was to seek the assistance of the US courts, so they don’t have to pay their creditors and can retain control.

“Forget nationality and all these things. Isn’t there the risk, if this Chapter 11 was to work, that any global bank with a significant presence in the US would hesitate about lending to a Bahamian company again on the basis of a mortgage over assets here?”

Mr Wilson’s comments echo the arguments of Baha Mar’s $2.45 billion lender, the China Export-Import Bank, which said the developer’s Chapter 11 filing interfered with the Bahamian-registered debenture it holds as security over the project’s real estate assets.

The issue was also dealt with by Justice Ian Winder in his refusal to recognise the Chapter 11 proceedings in the Bahamas, and give them legal effect here.

He ruled that all Baha Mar’s creditors had “a legitimate expectation” that any bankruptcy, and their claims, would be dealt with and governed by Bahamian law, not the US variety.

This was especially since 14 of the 15 Baha Mar companies subject to the Chapter 11 filing are domiciled in the Bahamas, with only one - Northshore Mainland Services - registered in Delaware, where the bankruptcy protection was sought.

Mr Wilson is thus arguing that were Baha Mar’s Chapter 11 reorganisation to succeed, it would set a dangerous precedent whereby Bahamian-domiciled creditors could rush to the US and follow the same procedures in a bid to shake-off local creditors - including lenders with locally-registered security over their assets.

“We need global banks to be willing to lend mortgages in the Bahamas,” Mr Wilson told Tribune Business. “That’s fundamental to our economy.

“What I’m saying to the business community - I’m not asserting this as I’m not a lawyer - but I think it would be prudent to be mindful of this risk; that this may influence the attitude of global banks with a significant presence in the US as to how they approach lending money to companies in the Bahamas.”

Lenders with US assets would be prevented from moving on any Bahamian security they have, as doing so would leave them in contempt of the bankruptcy court and expose their financial and property assets to seizure.

Many have argued that the Bahamas should itself pass its own version of Chapter 11-style laws in light of the Baha Mar situation, given that this nation does not allow owners of troubled companies to retain control. Receivership or liquidation are the only options.

Mr Wilson, meanwhile, described Baha Mar as “the flip side” of the Commodore Computers liquidation that he handled while working as an accountant.

Commodore came to the Bahamas to seek liquidation, he recalled, with one of its senior executives owning a home here. Yet Prudential, one of its main lenders, wanted the company to go into Chapter 11 bankruptcy protection in the US - where the credit had initially been extended.

Seeking to illustrate what he sees as the ramifications of Baha Mar going in the opposite direction, Mr Wilson said Commodore’s actions prompted Prudential to “change their loan documents so it couldn’t happen again.”