The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Baha Mar director yesterday said financing the project’s full $600 million construction completion represents “an extremely risky strategy” for the China Export-Import Bank, but conceded: “More power to them if they do.”

Dionisio D’Aguilar told Tribune Business that “as a Bahamian, I’d be delighted” if Baha Mar’s $2.45 billion debt financier took responsibility for financing the project to completion and opening.

He warned, though, that doing so would take the China Export-Import Bank into uncharted territory and create more unanswered questions, not least who would operate a completed Baha Mar until it was sold.

“Talking as a Bahamian, I guess one really doesn’t care how it [Baha Mar] gets finished, but from a business perspective, for the bank it’s an extremely risky strategy,” Mr D’Aguilar told Tribune Business.

“It’s one thing to finish it; it’s another thing to operate it. Whatever way it gets completed, I guess, is favourable to the country. The key is to get it finished and open.

“But then you have got to market it, get airlift in, and negotiate with all the retail stores and suppliers. It seems a very risky strategy to me, but if the Chinese intend to complete it, fine.”

Mr D’Aguilar was speaking after Tribune Business sources close to developments at Baha Mar revealed that the China Export-Import Bank was mulling a strategy change, whereby it financed the project’s completion itself and then sought an exit route, rather than an immediate sale now.

Legal documents indicate that the Government is pinning its latest bout of Baha Mar optimism on such a move, and is hoping that the contractor’s remobilisation to complete the convention centre will lead to bigger things in terms of completing the whole resort (see other article on Page 1B).

From the Government’s perspective, the fastest route to Baha Mar’s completion would likely be for the China Export-Import Bank to finance the $600 million required.

However, Tribune Business was told yesterday that the bank has yet to commit to this strategy, and the change of direction it would entail, although it remains one potential option to pursue.

Mr D’Aguilar, though, argued that should it adopt such a course, the China Export-Import Bank would merely be delaying “the inevitable”.

“They’re still going to have to take a write down,” he told Tribune Business. “Your operating losses are fairly contained now, but when you open it, they - pre-opening and opening expenses - will be large.

“They will have to balance the operating losses they will take, operating something they really don’t know how to operate, versus the write down they will take now if they sell it at a loss.

“Me personally, I believe it’s better to sell, take your losses and move on. The operating losses are a huge risk, as you don’t know what they will be.”

Should the China Export-Import Bank elect to finance Baha Mar’s completion, it would take its total exposure to Baha Mar to more than $3 billion via the likely $600 million-plus outlay.

While it could stand a better chance of fully recovering its funds through owning a more valuable, completed property that is ready to receive tourists, there is every likelihood that potential buyers would still be pushing for the bank to ‘take a hair cut’.

Tribune Business has repeatedly stated that the China Export-Import Bank’s desire to recover 100 per cent of its debt financing is at odds with buyer objectives, which will be to strike a ‘deal’ for an obviously troubled property, and force the bank to sell at a discount.

“Building a hotel in the Bahamas is a very risky strategy,” Mr D’Aguilar added: “The learning curve they’re [China Export-Import Bank] going to have to move up to get this property open is enormous.

“It would be great if they would engage Izmirlian to extract all his intrinsic knowledge.”

Engagement between Sarkis Izmirlian, Baha Mar’s principal, and other parties to the Baha Mar standstill appear to be a major stumbling block, though.

For Mr Izmirlian, in a statement issued at the weekend, said: “I have not heard from the Government since last October, and from the Prime Minister since last summer, even though I have made proposals that would enable Baha Mar to be opened and put Bahamians back to work.

“If the Government is serious about getting Baha Mar opened, then the Prime Minister should meet with me.”

Both the Christie administration and the Chinese have effectively ‘cold shouldered’ Mr Izmirlian ever since Baha Mar filed for Chapter 11 bankruptcy protection last June, declining to meet with him or respond to his proposals for resolution.

Tribune Business sources have suggested that Mr Izmirlian has been far from idle, and is forming an investor consortium to make an offer to buy Baha Mar back or, at the very least, ‘pick up the pieces’ if all other purchase options fail.

“I think he wants to buy it back. That’s what I hear. Bit he hasn’t told me that,” Mr D’Aguilar confirmed to Tribune Business yesterday.

The Government and Chinese, though, will likely do their best to avoid such a scenario, given that it would represent humiliation if they were forced to go back to Mr Izmirlian ‘tail between their legs’ style.

Mr D’Aguilar, though, said: “Business is all about humility. Sometimes you have to be humble in order to be successful.”

The Prime Minister has previously said that Atlantis creator, Sol Kerzner, has partnered with an investment fund to submit a new Baha Mar bid. Other names said by Mr Christie to be interested include the Mohegan Sun.