The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s Chinese lender and its receivers were yesterday said to be keeping all their options open, amid suggestions they have changed their strategy for resolving the $3.5 billion standstill.

Tribune Business sources close to the Baha Mar receivership, speaking on condition of anonymity, told this newspaper that the China Export-Import Bank was now “moving towards” financing the development’s full completion itself.

They added that Baha Mar’s $2.45 billion secured creditor had been “enlightened” by the three-month receivership process to-date, which had shown construction needs to be completed if the bank is to find a buyer willing to make it ‘100 per cent whole’.

Suggestions that the China Export-Import Bank and its receivers are contemplating a change of direction came as the Supreme Court yesterday approved the Government’s latest request to adjourn the Baha Mar winding-up petition.

Justice Ian Winder granted the request by the Attorney General’s Office, which was not opposed by any of the creditors or other parties to the Baha Mar impasse, and postponed the petition’s hearing for a further three months until May 2, 2016.

The postponement buys the China Export-Import Bank and its receivers, the Deloitte & Touche accounting firm, more time to either find a buyer or develop a solution to take Baha Mar forward to completion and opening.

Tribune Business’s contacts said the Chinese bank was coming to the realisation that the $3.5 billion project’s construction needs to be completed before it will attract the right buyer.

“The process has enlightened them to the point where they realise they need to complete the project,” a highly-placed source said, speaking on condition of anonymity.

“They realise that any serious buyer who would meet their requirements, and potentially the Government’s, would want to ensure there are warranties, and that the project is completed and ready to be marketed.

“Most buyers want to take over a completed project, rather than be responsible for its construction completion.”

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.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, who is acting as Baha Mar’s receiver together with two of the firm’s Hong Kong-based partners, declined to comment when contacted by Tribune Business yesterday.

However, this newspaper was told that the receivers and China Export-Import Bank were assessing whether completing Baha Mar’s construction and then selling the development, as opposed to exiting now, would provide a better chance to recover all its monies.

“That’s what they’re moving towards,” the source told Tribune Business. “The bank is going to finance the completion.

“That is what has been said to some of the [buyer] parties at this stage. The bank wants to finish completion of the project, and then take it back to the market.”

“They certainly realise that any serious investor would want to be purchasing and taking over a completed project,” the source continued.

“They’ve probably realised it’s in the best interests of all parties - including themselves and the buyer - that the project is completed. If you have the resources to do it, it makes complete sense to complete the project and take it back to the market.”

Prime Minister Perry Christie last week hinted at the Government’s hopes that the China Export-Import Bank will agree to fully finance Baha Mar’s completion, suggesting that the construction team that will be mobilised to finish its convention centre might remain at the site and conduct further work.

From the Government’s perspective, the fastest route to Baha Mar’s completion would likely be for the China Export-Import Bank to finance it, hence its enthusiasm for such a solution.

However, a commitment of this nature has yet to be ‘set in stone’ by the Chinese state-owned bank.

And such a strategy would represent a great risk for the China Export-Import Bank, which is a conservative lender not inclined to speculate on strategies that are high risk/high reward.

Prime Minister Perry Christie’s last assessment was that a further $600 million is needed to complete Baha Mar’s construction, never mind all the marketing and pre-resort opening expenses that will be incurred.

Should the China Export-Import Bank elect to finance this, it would take its total exposure to Baha Mar to more than $3 billion.

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’.

Sources close to the receiver, meanwhile, suggested that ‘construction completion and then a sale’ had always been an option for them and the China Export-Import Bank.

Tribune Business was told that Deloitte & Touche and the bank are employing “a dual approach” that does not block off any avenues for a successful Baha Mar resolution, with an immediate sale - as well as financing the completion and opening - both on the table.

“They’re not treating anything as being a road map,” one source said of the receivers. “They’re preparing for both a full construction mobilisation and preparing to sell the asset.

“They’re going down both barrels so that they won’t be tied up. They don’t know ultimately how this thing is going to play out, and they’re preparing for anything that might happen.”

They added that the receivers were still assembling all the information buyers would require to make an informed bid on Baha Mar, with real estate and property valuations now awaited.

“The receivers are moving on everything,” the source said. “Nothing is at a standstill. Everything is very active, and the bank is engaged in the whole process. It ain’t sitting there and nothing is happening. Far from that.”

Tribune Business understands that Deloitte & Touche has been working to put a construction team, featuring Chinese and Bahamian interests, together for the convention centre’s completion.

The receivers have been attempting to rebuild the construction management structure that was in place prior to the Chapter 11 bankruptcy protection filing last June.

However, a source familiar with the situation confirmed that completing the Baha Mar convention centre in time for the Inter-American Development Bank’s (IDB) Board of Governors meeting “shouldn’t be a heavy, heavy lift”.

This contradicts the impression being given by the Christie administration that getting the convention centre completed and open in time for the IDB conference will be a major accomplishment.