The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s financier yesterday admitted Bahamians had been pushed further down the ‘creditors queue’ by the receivers’ financing requirements, as it slammed “entirely unfounded” suggestions that it was responsible for the project’s demise.

The China Export-Import Bank, in a statement sent to Tribune Business via its attorneys, said it was “more eager” than anyone else to resolve the $3.5 billion development’s fate because its value was “declining with each passing day”.

Baha Mar’s $2.45 billion financier also again indicated that there may be a ‘long work out’ before the project’s future is resolved, pointing out that its sheer scale “takes time to market”.

Its statement gave no hint that the search for a purchaser may be close to completion, suggesting that Prime Minister Perry Christie’s “optimism” that a resolution may soon be in sight is unfounded - unless the China Export-Import Bank decides to finance Baha Mar’s completion itself.

The Chinese lender made no mention of doing so in yesterday’s statement, which appears to have been a response to recent comments by Baha Mar’s original developer, Sarkis Izmirlian, and people close to him, such as ex-director, Dionisio D’Aguilar.

In several subtle, and not-so-subtle, comments, the China Export-Import Bank said it was forced to take over Baha Mar, and appoint the Deloitte & Touche accounting firm as receivers, because Mr Izmirlian “is no longer capable” of operating the project.

Hitting out at unnamed persons with “ulterior motives”, who were seeking to blame it for Baha Mar’s demise, the Chinese bank said: “The bank, having made tremendous efforts in addressing the issues related to the project, feels that the recent criticism is entirely unfounded.

“Since the original developer is no longer capable of operating the project, the bank, in order to ensure the security of project assets and safeguard the rights and interests of all stakeholders, was obliged to appoint Deloitte as receiver-managers over the project assets.

“They have set up a professional team that works around the clock to fulfill numerous heavy tasks, including maintaining the normal operation of the project site, securing investors, and sorting out debt obligations.”

The China Export-Import Bank then confirmed Tribune Business’s exclusive revelation that Bahamians have fallen further down the Baha Mar creditors queue as a result of the $50 million loan extended to Deloitte & Touche to cover costs associated with preserving and maintaining the resort assets.

“During this process, the receiver/managers had to undertake huge expenses arising from project maintenance by arranging loans, and the Bank had to agree to allow these loans to take priority to the bank’s debt upon any sale of the property,” Baha Mar’s financier told Tribune Business yesterday.

This newspaper reported on December 4 last year how the $50 million injected by China Harbour Engineering Company (CHEC) was not only a loan that must be repaid, but is also a ‘preferential’ financing that now ranks ahead of all other creditors.

CHEC’s funding is senior to all other security and charges over Baha Mar’s real estate assets, including the $2.45 billion debenture possessed by the project’s main financier, the China Export-Import Bank.

The effect of its $50 million loan is to drop all Baha Mar’s Bahamian creditors - contractors, the 2,000 laid-off staff and other local suppliers - further down the creditors’ queue, reducing an already-remote chance they will receive something, let alone 100 per cent, of what is due to them.

Prime Minister Perry Christie has repeatedly promised that the 120 Bahamian construction companies, which are owed a collective $74.3 million, and other local creditors, will be made whole.

But the nature of the CHEC financing, and China Export-Import Bank’s confirmation, raises fresh questions over whether this will actually happen.

Baha Mar’s main financier said it “also has to suffer from the fact that the value of the project assets is declining with each passing day”.

“Therefore, the bank is more eager than any other party to see that the project is handled properly,” the China Export-Import Bank said.

It added that it was not insensitive to the economic and social fallout in the Bahamas that had resulted from the $3.5 billion development coming to a standstill.

“China Ex-Im Bank is fully aware of the importance of the Baha Mar project to the Commonwealth of the Bahamas and the people of the Bahamas,” its statement said.

“The China Ex-Im Bank is a responsible bank. When it takes actions and makes decisions, the bank bears in mind not only its own interests but also the interests of the Bahamas and the Bahamian people.”

Yet it gave no encouragement, especially to the Government and all Baha Mar’s creditors and laid-off employes, that the search for a buyer would bear fruit any time soon.

“The bank, along with the receivers, has been working hard to look for a competent investor who can take over the project with an integrated overall plan for the management of all parts of the project, so that it will generate sustainable and maximum value for all stakeholders,” the China Export-Import Bank said.

“Any action taken or measure adopted that is based on short-term, temporary or individual interests is irrational and irresponsible.

“As the Baha Mar project is a huge hotel complex, it takes time to market, and for any investor interested to carefully study the project and gain a thorough understanding before making the final decision.”

This certainly does not match the Prime Minister’s “optimism” and expectation of a quick resolution for Baha Mar’s plight, despite his constant ‘name dropping’ of parties said to be interested in acquiring the development.

Sir Sol Kerzner, the Mohegan Sun, Albany’s investors and the Fosun group are just some of the potential buyers that have been touted by Mr Christie, yet a deal between any of them and the China Export-Import Bank still seems far off.

The Prime Minister again conceded this week that Baha Mar’s fate is outside his government’s hands, and lies with the Chinese bank and its receivers, implying that his letters to the China Export-Import Bank president urging it to ‘get a move on’ have yet to be heeded.

Mr Izmirlian did not return Tribune Business’s message seeking comment on the China Export-Import Ban’s statement.

However, sources close to the former developer said the China Export-Import Bank’s confirmation that Bahamians had fallen down the Baha Mar creditors queue had been duly noted.

They agreed that the bank’s statement raised questions about the Prime Minister’s “optimism”, and also noted that Baha Mar’s financier had not referred once to the project’s contractor, China Construction America (CCA).

The sources also pointed out that the depreciation of Baha Mar’s assets, and the loss of value, was exactly what last year’s Chapter 11 bankruptcy protection filing was intended to prevent. This was successfully opposed, and overturned, by China Export-Import Bank and CCA.