The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s original developer yesterday moved to intensify pressure on the Government by calling on the several thousand Bahamian creditors to unite behind pursuit of a $192 million legal claim against the project’s contractor.

Sarkis Izmirlian’s BMD Holdings vehicle, in a letter that was supposed to be distributed to local creditors yesterday, urged them to pressure the Christie administration to properly fund the $3.5 billion development’s joint provisional liquidators.

The letter, signed by ex-Baha Mar president, Tom Dunlap, warned the estimated 3,500 Bahamian creditors to “make their voices heard” because no one was protecting their interests by pursuing one of the largest recovery sources.

It points out that the Deloitte & Touche receivership team’s main goal is to maximise Baha Mar’s sales value for its secured lender, the China Export-Import Bank, rather than ensure Bahamian creditors receive the multi-million dollar sum due to them.

And, given that both the bank and China State Construction Engineering Corporation (CSCEC) enjoy common ownership, in the shape of the Chinese government, Mr Dunlap said the former - and its receivers - were extremely unlikely to pursue the $192 million claim lodged against the contractor last summer in the UK high court.

That already-remote possibility, he suggested, became even less likely this week after Prime Minister Perry Christie confirmed that the two Chinese entities were in talks over construction remobilisation at Baha Mar.

The last thing the China Export-Import Bank will do, given its reliance on CSCEC’s China Construction America (CCA) subsidiary to complete Baha Mar, is instruct its receivers to go after the UK court action.

As a result, Mr Dunlap’s letter argues that the persons best-placed to protect Bahamian creditors are the joint provisional liquidation team of Bahamian accountant, Ed Rahming, and the UK-based Alix Partners duo, Alastair Beveridge and Nicholas Cropper.

The trio were appointed last September as a result of the Christie administration’s winding-up petition.

However, Mr Dunlap argues that having successfully secured their appointment, the Government has failed to provide the joint provisional liquidators with the necessary funding to properly do their jobs, meaning they are unable to protect local creditors.

“Your interests are at stake,” Mr Dunlap tells Baha Mar’s Bahamian creditors in a letter published inside The Tribune today.

“Tell the Government you need representation, and that the JPLs (joint provisional liquidators) must receive funds to fulfill their role. There is no sign that the receiver (appointed for China Export-Import Bank, not you) will fund the JPLs, and there is every reason to believe that they would not do so.

“Tell the court it must order an investigation of the claims against CSCEC. We urge all creditors, especially Bahamian creditors, to make their voices heard now before it is too late.”

Mr Dunlap’s letter could also be interpreted as an attempt to rally Bahamians to pressure the Supreme Court, though, a move that may not sit well with the judiciary.

Mr Izmirlian’s latest move is effectively an extension of the Supreme Court petition filed last month, in which he asked it to approve a process whereby the $192 million action against CSCEC can be pursued without the involvement of the China Export-Import Bank or its receivers.

The claim, which Mr Izmirlian and his companies believe is “one of the most valuable potential recovery sources for the project’s creditors”, seeks to enforce the CSCEC’s May 2011 guarantee that its subsidiary would fulfill all obligations - especially completing and opening Baha Mar on time.

Mr Dunlap’s letter also seeks to ‘put the ball back in the Government’s court’, implying that it is failing to look after the interests of its own Bahamian people by providing the necessary funds to the very joint provisional liquidators it pushed to appoint.

Mr Rahming told Tribune Business last night that he was unaware of the BMD Holdings letter. Explaining that he was on another line and would call back to discuss further, he failed to do so, and subsequent Tribune Business calls went through to his voice mail.

However, there were signs that Mr Izmirlian’s approach may bear fruit with at least some Bahamian creditors, even though those spoken to by this newspaper said they had yet to see the letter.

“I think that’s what we need to do,” one creditor, speaking on condition of anonymity, told Tribune Business when informed of the letter’s contents. “We’ve all been left holding the bag.

“We filed all the paperwork, and did everything necessary to register the claim, both here and in Delaware. Why isn’t the Government looking out for its own people, and making sure the local people get paid? Why aren’t they at least looking out for the local people?”

Bahamian contractors are collectively owed around $74 million for work done on Baha Mar. Trade creditors (vendors and suppliers) were said to be owed a total $123 million when the project was placed into Chapter 11 bankruptcy protection last June, with Bahamians accounting for 68 per cent - or 3,523 out of 5,172 - of Baha Mar’s creditors.

Prime Minister Perry Christie previously said he was pushing the China Export-Import Bank to make Bahamian contractors and creditors ‘whole’, but there was no mention of this in his mid-year Budget presentation on Monday.

“The Prime Minister told the House of Assembly on Monday that intensive discussions are being held between CCA’s parent, CSCEC, and the bank on detailed plans of remobilisation,”Mr Dunlap writes.

“Whilst we are all for progress, those comments also underscore that the bank and the receivers will assuredly not pursue the valuable claims against CCA or CSCEC, including the lawsuit against CSCEC currently pending in the UK High Court, as urged by Granite Ventures [Mr Izmirlian’s company] in its recent court filing.

“Those claims potentially add value to the estate and thereby generate real dollars to be paid to you. The Prime Minister said that such a deal between CSCEC and China Export-Import Bank would require the approval of their regulators, but he did not say that approval is required by the Bahamian court. Creditors should be very concerned that they will be left out in the cold. No one is protecting your interests right now.”

Mr Dunlap said the joint provisional liquidators’ funding, which originally came from Baha Mar’s remaining cash and payments received, had quickly run out.

With the China Export-Import Bank and Deloitte & Touche’s priorities lying elsewhere, the ex-Baha Mar chief added: “This is exactly why the Bahamian Government must step up and act now on behalf of the unsecured creditors, [and] to fulfill its assurances to you.

“The Government must now fund the JPLs so that they can do their job on behalf of Baha Mar’s unsecured creditors; on your behalf. The assets of Baha Mar must be managed and monetised to maximise their value.

“This includes, among other efforts, pursuing the UK litigation claim against CSCEC effectively. This means not allowing either China Export-Import Bank or CSCEC to undertake actions, such as instituting new financial commitments, that further push the unsecured Bahamian and international creditors down the line in financial recovery. It means not allowing Baha Mar to be sold at a discount by China Export-Import Bank at the expense of the unsecured creditors.”

Tribune Business revealed last year how the $50 million to finance Baha Mar’s receivership had been paid by an outside party, China Harbour Engineering Corporation (CHEC).

That payment has a priority ranking in the creditors’ queue, and is even higher than the China Export-Import Bank’s $2.45 billion security, meaning that Bahamian contractors and creditors have been pushed further down.

“The JPL’s are the only ones who can possibly advocate for, and have the responsibility to represent, the best interests of the vendors, suppliers and individuals who are the unsecured creditors,” Mr Dunlap writes.

“Despite this role of central importance, the JPLs are not being paid, and consequently, the unsecured creditors have no voice advocating their interests before the Bahamian court. Without such an advocate, no one can check or stem the actions of the receivers.”

Mr Dunlap said it was also time “for plain speaking and jargon-free information” about the reasons for Baha Mar’s woes.

He reiterated Mr Izmirlian’s belief that CCA had “deceived” him, the Government and the Bahamian people, with ‘“serious economic consequences”.