The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian last night slammed the inclusion of a China Construction America (CCA) executive on the committee that will determine how much Baha Mar’s unsecured Bahamian creditors will receive, arguing that it was “not in their best interests”.

Mr Izmirlian’s comments, issued through his BMD Holdings vehicle, came after Tribune Business’s exclusive revelations of last week were confirmed by the Government, which announced the membership of the committee that will oversee payments to creditors.

Tribune Business last week disclosed that the agreement between the Government and the China Export-Import Bank, Baha Mar’s $2.45 billion secured creditor, called for payments to be made through a proper structure supervised by the committee.

This newspaper also reported that creditors owed $500,000 and less, which will largely by the 2,000 former Baha Mar staff, are to be paid first, while others with larger claims - such as suppliers of goods and services, and the 123 Bahamian contractors owed a collective $74 million - will do “fairly well”.

However, Tribune Business was told that how much larger claimants will receive will depend on their particular circumstances and contracts, and that there will be an element of “negotiation, compromise and settlement” - indicating they may not receive 100 per cent of what they are owed.

These details were effectively confirmed by Leslie Miller, the PLP MP who is himself a Baha Mar creditor, who yesterday said those owed $500,000 or less would be made ‘whole’. Those with larger sums will likely recover around 50 per cent.

Mr Miller said: “I understand that those up to $500,000 will get full pay, and after that you will have to negotiate and hopefully you’ll get 50 per cent. That is what I am told.”

A number of Bahamian creditors, who have been waiting around 20 months to receive payment, are likely to regard 50 per cent as better than nothing, given that many will probably have written off their Baha Mar debts.

Tribune Business sources last week confirmed that more than 90 per cent of creditors would get paid, although how much, when and by whom was not revealed.

The Government, in a statement yesterday, expressed hope that the settlement of small claims - mainly those by former Baha Mar employees for severance pay and other benefits - would be settled by September 30, 2016.

It is aiming for all other creditors to be paid by year-end, given that the China Export-Import Bank will “shortly place on deposit in the Bahamas the funds necessary” to effect the payouts.

The Government, while confirming that the Supreme Court-approved agreement had provided a formula for paying Bahamian creditors and how those claims would be assigned, acknowledged that the timing of payouts would depend on the committee.

The committee’s membership features former finance minister and Central Bank governor, James Smith; Grant Lyon, the Government’s liquidation claims advisor; Yanping Mo, representative of the China-Export-Import Bank); Norbert Chan, a representative of Deloitte & Touche (Baha Mar’s receivers); and Tiger Wu, representing CCA.

The involvement of CCA likely could not be avoided, given that it will be required to adjudicate on the claims submitted by its sub-contractors, and determine whether these are valid.

However, CCA’s place on the committee particularly vexed Mr Izmirlian, who said its inclusion would undermine creditor trust in the process given the previous alleged failings of Baha Mar’s main contractor.

“It is hard to understand how the best interests of unsecured creditors can be served by a committee that specifically includes the Chinese Construction Company (CCA) and its executive, Tiger Wu,” Mr Izmirlian blasted.

“This is the same CCA and Tiger Wu who failed to meet construction deadlines, causing Baha Mar to not be completed and to not open. It is the same CCA that created a Baha Mar creditor situation in the first place.

“It is the same CCA that opposed the Chapter 11 filing and helped to stop the developer’s reorganisation plan to pay Bahamians in full and complete Baha Mar with Bahamian contractors. And this is the same CCA and leadership which have been sued in various legal proceedings for failing to pay parties to whom CCA owes monies for its non-performance.”

Mr Izmirlian concluded: “CCA has proven itself to be a serial deceiver of the Prime Minister of the Bahamas and the Bahamian people. The unsecured creditors of Baha Mar have every reason to be wary and concerned about the credibility of this committee and its agenda.”

However, a Tribune Business source familiar with the Baha Mar situation, yesterday again backed the Government’s position that “real money and remobilisation” will flow from the Government’s agreement with the Chinese bank and contractor to complete the property’s construction.

“It’s not just a game and smoke and mirrors here. This is going to be real money and remobilisation,” the source, speaking on condition of anonymity, said.

“There is real money, and creditors and employees are going to get real money, and money is probably going to start flowing in the next 30-60 days.”

Tribune Business was also reminded that the China Export-Import Bank was under no obligation to pay the former employees and creditors one cent, given that these were liabilities owed by Mr Izmirlian and Baha Mar.

As for the investment incentives granted to the Chinese, this newspaper’s source said that there was “a package of concessions”, but in negotiating them the Government was mindful that it could not go beyond what had been granted to Atlantis.

This implies that Customs duties and VAT will have been waived on all construction materials and fixtures/furnishings imported for the project, adding to the $1.2 billion granted previously to Mr Izmirlian.

Tribune Business also understands, though, that Stamp Tax may be waived on the sale of Baha Mar to any buyer and the property’s transfer out of receivership for construction completion - an element that is a potentially major revenue earner for the Treasury.

This newspaper’s source, meanwhile, suggested that the fundamental problem underlying public reaction to the Baha Mar deal was the lack of trust the Bahamian people had in the Government.

With many believing the Christie administration was hiding something, and had “ulterior motives” and “hidden agendas”, they said that convincing the public to buy into the agreement currently was “hopeless”.

Likening the situation to the public’s reaction to recently-failed constitutional referendum, the source said: “If the Government said it wants to provide free milk for babies, the public would be saying: We don’t believe them because no one trusts them.

“When the Government loses the trust of a large segment of the public, it’s very difficult because people assume the worst.

“The public does not trust the Chinese either, making it a double whammy. It’s compounded. They don’t trust the bank, the don’t trust the construction company, and they don’t trust the Government. Put all that together, and it’s hopeless.