The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged not to approve any purchase of Baha Mar by China Construction America (CCA), amid fears this would “put too much of our tourism product in one basket”.

Dionisio D’Aguilar, an ex-Baha Mar director, told Tribune Business he feared that CCA would be selected as the ‘preferred bidder’ for the $3.5 billion development, given that it was effectively a ‘sister company’ of its secured creditor.

Expectations have been mounting in recent days that CCA, Baha Mar’s main contractor, would submit a bid in the formal sales process for the project.

Such hopes were first floated by the development’s Deloitte & Touche receivership team, but Mr D’Aguilar suggested CCA’s involvement would render the sales process “flawed” because of the advantages it held over rival bidders.

Apart from its intimate knowledge of Baha Mar’s construction, and what remains to be done, Mr D’Aguilar said it enjoyed common ownership - in the form of the Beijing government - with the institution that will make the decision on Baha Mar’s fate, the China Export-Import Bank.

He added that CCA would, unlike rival bidders, be able to ‘bill itself’ at cost on the remaining construction, undercutting competitors while employing the same model used for The Pointe project - that of being owner, financier and contractor.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, declined to comment yesterday, when asked by Tribune Business how many bids had been received by the Monday, May 9, deadline.

Some 16 groups were said to have expressed interest in acquiring Baha Mar at last week’s Supreme Court hearing on the project’s joint provisional liquidation. But Mr Winder, who is one of the Baha Mar receivers, also refused to identify the investors behind the bids received.

“I think that CCA is bidding, and it’s very hard for anyone to compete against companies with inside information,” Mr D’Aguilar, a Baha Mar director under original developer, Sarkis Izmirlian, told Tribune Business.

“I think the process is flawed.... It’s likely to be from one Chinese company to another. It really makes you wonder why we’re going through this process, as CCA would have the advantage of being able to complete Baha Mar at cost, and is a sister company to the bank. They have the same shareholder.”

Mr D’Aguilar encouraged the Christie administration not to approve any CCA purchase of Baha Mar on the grounds that it would further concentrate ‘mega resort’ and tourism industry ownership.

And this ‘concentrated ownership’ would be in the hands of a state-owned company, not just a private concern, giving China undue influence over the Bahamian economy and key strategic assets.

“I’m sure the Government will not see fit to have CCA own the Hilton project downtown and Baha Mar and Cable Beach,” Mr D’Aguilar told Tribune Business.

“That is not something we want. You have too much of your tourist product in one basket, and you really become beholden to a foreign government.

“It’s one thing to become beholden to a foreign company, another to a company, when you have someone sitting down there, willing to pay off the bank and Bahamian creditors.”

Mr Winder, meanwhile, declined to respond to claims by Mr Izmirlian that the receivers had engaged in a game of “rope a dope” with him, refusing to discuss his offer to take over Baha Mar.

Tribune Business sources close to developments, though, informed this newspaper that the receivers vehemently rejected this allegation, and had instead been “begging and pleading” with Mr Izmirlian to submit a bid.

Some were yesterday suggesting that Mr Izmirlian and the former Baha Mar executives still with him were, via letters sent to the media, engaged in a PR offensive to paint the receivers and China Export-Import Bank as ‘the bad guys’ for refusing to discuss his offer.

In particular, they questioned whether Mr Izmirlian and his BMD Holdings vehicle had the necessary financing in place to support such an offer, given that an inability to pay the project’s debts forced him to place Baha Mar in Chapter 11 bankruptcy protection last June.

“This is the same man who filed for Chapter 11, but who now has the capacity to pay off the bank,” one source, speaking on condition of anonymity, told Tribune Business.

“He could not meet the bank payments, and entered Chapter 11 to force the bank to take a haircut. Now he’s saying he has the financial wherewithal, and is in position, to pay off the bank, all the creditors and the pre-Chapter 11 costs?”

With China Export-Import Bank owed $2.45 billion, and Bahamian and trade creditors out a collective $123 million at the time of the Chapter 11 filing, not to mention the monies claimed by CCA and others, around $3 billion is likely required to make all parties ‘whole’.

That does not include the $600 million needed to finance Baha Mar’s construction completion, plus pre-opening costs that are likely to add close to $1 billion to a buyer’s outlay.

Sources also suggested that Mr Izmirlian’s offer, and current position, fail to take into account that China Export-Import Bank wanted no more involvement with Baha Mar.

It is simply seeking an exit route, they added, yet Mr Izmirlian wanted it to produce $300 million or 50 per cent of the construction financing and “stay in as a long-term debtor”.

And the same sources said it would be ‘crazy’ for the China Export-Import Bank not to engage Mr Izmirlian if he had the financing to do what he was promising.

Mr D’Aguilar, meanwhile, said it was “a pity” that Baha Mar’s receivers had been unable to accommodate Mr Izmirlian in the process.

“I don’t see why they couldn’t make the necessary adjustments to get the developer everyone wants to bid to be part of the process,” he told Tribune Business.

“There’s no doubt Mr Izmirlian was right, and that he did not want to be sucked into a process that impairs his rights and remedies under his previous investment in Baha Mar, and where CCA is bidding.

“CCA will naturally be the preferred bidder, and he does not want to be part of an imperfect process.”

Tribune Business first revealed Mr Izmirlian’s concerns over the Non-Disclosure Agreement (NDA) the receivers wanted him to resign before he could participate in the sales process.

Although the Deloitte team offered to modify this for him, Mr Izmirlian felt the requirement he not consult those formerly involved with Baha Mar, and who are no longer in his employ, could expose him to potential litigation because it would be difficult for him to prove he was abiding by these terms.

And he also feared such a development could “sully” and “contaminate” his existing legal actions against Baha Mar’s Chinese contractor, including the $192 million claim against its Beijing parent in the UK High Court.

Mr D’Aguilar also questioned whether CCA had the management expertise to successfully run a resort as complex as Baha Mar, and if had the contacts and commercial expertise in dealing with hotel, restaurant and retail brands.

And he asked whether Mr Izmirlian’s removal from the Baha Mar project had been CCA’s plan “from day one”.