The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s secured creditor agreed to fund the $3.5 billion project’s completion because potential purchasers have told it they will not buy an unfinished mega resort, with more than 90 per cent of local creditors set to be paid.

Sources familiar with the agreement between China Export-Import Bank and the Government, speaking on condition of anonymity, conformed that the former had been forced to reverse its earlier position of not investing a further cent into Baha Mar.

“There weren’t any buyers interested in buying an unfinished building,” this newspaper was told bluntly, thus forcing China Export-Import Bank’s hand on the construction financing.

Tribune Business understands, though, that Baha Mar’s receivers are still meeting with and talking to interested parties, having previously reduced the ‘preferred bidder’ field to a two-strong shortlist.

One of those groups featured Lyford Cay billionaire, Joe Lewis’s, Tavistock Group, the developer of the $1.4 billion Albany project, while the other is thought to have been a Chinese-led consortium.

Dionisio D’Aguilar, a former Baha Mar director, yesterday expressed concern that the China Export-Import Bank would merely add the construction financing and other costs to the price it is seeking from buyers, taking this to between $3.2-$3.5 billion.

He suggested this would make it “incredibly hard” to sell Baha Mar, given that few investors would be willing to make such an outlay, which indicated that the China Export-Import Bank might seek to own the project post-opening and engage hotel and casino operating partners.

But the bank’s thinking, and that of its Deloitte & Touche receivership team, was also influenced by the knowledge that further delays to Baha Mar’s completion would only lead to continued devaluation of the resort assets, plus create more harm for the Bahamian economy.

The Government was yesterday attempting to keep details of its Supreme Court-approved construction completion agreement with the China Export-Import Bank a secret, with the absence of specifics in Prime Minister Perry Christie’s announcement generating much scepticism about whether what is promised is for real.

While hailing the announcement as “positive news”, Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, said the private sector needed to know specifics.

“It’s certainly headed in the right direction,” he told Tribune Business, “but we do not know the details of this agreement, the terms negotiated, and that’s when the rubber hits the road.”

However, sources familiar with the agreement assured Tribune Business that the deal was “substantial”, and that Bahamian contractors and other unsecured creditors would “do quite well” in terms of receiving compensation owed to them.

This newspaper was told that more than 90 cent of creditors would be paid, and that a specific structure - including a committee that will oversee the payment process - will be created.

Unsecured Bahamian creditor claims will be dealt with via a ‘pool’ system, it is understood, with those owed $500,000 or less to be dealt with first.

“The big issues have been agreed,” one source, speaking on condition of anonymity, told Tribune Business. “It’s not pie in the sky.”

Acknowledging public concerns about the absence of details in the Prime Minister’s speech, they said the agreement between the Government and the China Export-Import Bank had to be “nailed down” and “fleshed out” properly if the deal was to obtain Justice Ian Winder’s approval.

“The document is fairly extensive in order to get the court’s approval,” the source said. “It did have to be fleshed out quite specifically. It’s not a kind of ‘high level’ Heads of Agreement and you have tonnes of things to sort out.

“Most of this thing had to be nailed down before the court would approve it. It’s a substantial agreement, and more fleshed out than just a general Heads of Agreement because the court needed more. Otherwise, it wouldn’t have been able to approve it.”

The source acknowledged, as did the Prime Minister, that several details regarding the agreement remained to be worked out, such as “mechanisms for how it’s going to work” and be executed in practice.

“Implementation is going to be critically important,” they added, with the China Export-Import Bank now having to set the plan in motion and make funding available.

The source also suggested that the sums received by Bahamian contractors and other unsecured local creditors would be determined on an individual basis, and vary between firms depending on the nature of their contracts and other circumstances.

“They are going to do quite well,” the source said of the Bahamian creditors. “The overall mechanism, structure and funding has been put in place.

“Individual deals, settlements and compromises have to be worked out with individual contractors. It’s certainly all being worked out.

“It’s been a long time, and a lot of people have suffered, but when it all comes out I think people will see it’s a pretty fair deal.”

Tribune Business was also told that the cost to complete Baha Mar was “not going to be less” than the $600 million previously quoted by the Prime Minister, and the combined price tag for this, CCA’s remobilisation, and creditor compensation would be “a huge figure” anywhere between that number and $1 billion.

Bahamian contractors are said to be owed a collective $74 million for work completed on the Baha Mar project, while trade creditors were out a total $123 million when Baha Mar filed for Chapter 11 Bankruptcy protection in June 2015.

Mr Christie’s announcement was short on details in terms of creditor compensation - in particular how much they would each be paid, when, how and by whom.

He said China Construction America (CCA), Baha Mar’s main contractor, would “resolve outstanding claims with sub-contractors and suppliers”, while “funds will be made available” for Bahamian contractors and other local creditors “to recover a significant portion, and possibly all”, of the monies owed to them.

The Prime Minister promised that more details on the Government’s agreement with the China Export-Import Bank will be released shortly, as he acknowledged that much paperwork relating to the deal still had to be completed.

He said “many of the people and companies” previously hired to work on Baha Mar as sub-contractors would be re-engaged to complete the project, while the Government and its corporations, such as Bahamas Power & Light (BPL), will “recover some of their outstanding claims against the Baha Mar companies”.

Significantly, the agreement also includes compensating Baha Mar’s former employees, including the 2,000 staff made redundant last November.

Mr Christie said they would receive outstanding salaries, severance and accrued vacation pay, while sums deducted from their salaries and pension contributions will be repaid.

Tribune Business sources, meanwhile, said it was “not largely the case” that creditor payments would be financed through the Public Treasury and Bahamian taxpayer, via the investment incentives granted to the Chinese.

Tribune Business was told these were no greater, in either sum or extent, than the incentives normally granted to resort developments of a similar nature.