The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-Baha Mar director yesterday expressed delight that a Cabinet Minister agreed all Bahamian creditors should be compensated, even if the Government “cuts a backroom deal with the Chinese”.

Dionisio D’Aguilar, though, told Tribune Business that suggestions by Jerome Fitzgerald, minister of education, science and technology, of Baha Mar’s Bahamian creditors taking a ‘haircut’ through the Chapter 11 process were “completely untrue”.

Arguing that there was “no need” for Mr Fitzgerald to label him “a total and complete hypocrite”, Mr D’Aguilar hit back by calling for the Minister to focus more on his portfolio than business matters.

And he urged Mr Fitzgerald to leave such situations to “successful businessmen”, a seeming reference to RND Holdings, in which the Minister - prior to becoming and MP and Cabinet Minister - sold his majority equity interest to Colina.

“I don’t understand why he’s getting so excited and got to be vitriolic,” Mr D’Aguilar told Tribune Business. “There’s no reason to get down and dirty.

“He [Mr Fitzgerald] seems to be in the press a lot these days, fighting Fred Smith and Save the Bays, and I guess he needs to prove he’s a bad ass to the PLP and pandering to his base. He must be vying for the leadership, attacking opponents of the Government’s policies.”

Mr Fitzgerald last week said it was ironic that Mr D’Aguilar was calling for all Bahamian creditors to be fully compensated, given that the Baha Mar Board he was part of tried to do exactly the opposite in filing for Chapter 11 bankruptcy protection last June.

The Minister of Education, who sits on the Cabinet sub-committee responsible for dealing with the Baha Mar impasse, added that “the record” from the Delaware Bankruptcy Court proceedings showed that Sarkis Izmirlian wanted all creditors to take a ‘haircut’.

Suggesting that this exposed the “hypocrisy” of Mr D’Aguilar’s call for the Government to protect Bahamian interests in any Baha Mar sale, Mr Fitzgerald said the Christie administration had already taken such a position.

He added that the Government had “made it abundantly clear” to both Baha Mar’s secured creditor, the China Export-Import Bank, and any prospective purchasers that no acquisition would be approved unless all Bahamian creditors received 100 per cent of what was due to them.

Mr D’Aguilar, though, blasted back yesterday by saying: “The bottom line is that what he’s saying is completely untrue.

“Baha Mar was going to take care of the Bahamian creditors as part of Chapter 11.”

He challenged Mr Fitzgerald to show where he obtained the figures of a ‘10-12 cents on the dollar haircut’ from, as they were not contained in any Baha Mar Chapter 11 filings.

However, Mr D’Aguilar expressed delight that he and Mr Fitzgerald (and the Government) were in agreement that all Bahamian creditors must be fully compensated in any Baha Mar resolution.

He explained that he made this call to prevent any “backroom deal” being cut between the Government and Chinese that was not in the interests of Bahamians, and could leave the creditors ‘out to dry’.

“There are a lot of rumours swirling around that a backroom deal is being cut with the Chinese, and I just wanted to make sure that if they were, the Bahamian creditors were not going to be left out,” Mr D’Aguilar told Tribune Business.

“Sarkis Izmirlian said he’d take care of the Bahamians, and I wanted to make sure any deal with the Chinese did not leave them out.”

Some 123 Bahamian contractors are owed a collective $74 million for work done at Baha Mar, while the trade vendors, suppliers and others are also owed significant sums.

A total $123 million was said to be owed to trade creditors when Baha Mar filed for Chapter 11 bankruptcy protection last June, and Standard & Poor’s (S&P) recently put the project’s debts to creditors as high as $170 million.

Then there are the former 2,000 Baha Mar employees, who are at the bottom of the creditor queue, waiting for their due severance pay and other entitlements.

The deal Mr D’Aguilar is referring to is the Government’s hope that the China Export-Import Bank, Baha Mar’s secured creditor, can reach an agreement with fellow Chinese state-owned entity, China Construction America (CCA), to complete Baha Mar’s construction.

Prime Minister Perry Christie has branded as an “absolute lie” that the Government had agreed to grant 500 Bahamian citizenships to Chinese investors in return for Baha Mar’s resumption.

Apart from the 500 citizenships, the Chinese demands supposedly include that Baha Mar’s original developer, Sarkis Izmirlian, be out of the picture completely; and that the $3.5 billion development be ‘tax free’ for 30 years.

Such demands, if true, envisage that the Government earn not a single cent from Value-Added Tax (VAT), real property tax, casino tax and a host of other taxes for three decades - essentially a ‘tax holiday’ across several generations of Bahamians.

The Chinese were also said to have demanded a 25 per cent increase above the value of the investment incentives granted to the Government by Mr Izmirlian. Given that the Christie administration previously valued these collectively at $1.2 billion, this amounts to a $300 million increase to $1.5 billion.

The incentives granted to Mr Izmirlian were for a 20-year period, not 30 years, and were not as extensive as those supposedly sought by the two state-owned Chinese entities.

These requests are likely to form an initial Chinese ‘negotiating position’ over the Government’s desire for CCA and China Export-Import Bank to agree to the construction resumption.

The Chinese are likely to seek a ‘very hard bargain’, given that they know the Government and Mr Christie are in a position of extreme weakness - having given up all control of Baha Mar’s fate, but desperate for something to happen with a general election on the horizon.

The demands are likely to have prompted the sudden dispatch of Allyson Maynard-Gibson, the attorney general, and Sir Baltron Bethel, Mr Christie’s senior policy advisers, to Beijing in the hope that they can somehow salvage a deal that can be sold to the Bahamian people in time for today’s Budget communication.

The duo’s hasty departure also indicates that an agreement for Baha Mar’s construction resumption, certainly one acceptable to the Government, was not in place before last weekend.

Tribune Business understands that the furore surrounding the Chinese position, even though the Government has not agreed to it, has forced the Prime Minister to tweak his Budget address to provide a more detailed statement on Baha Mar than initially planned.

Tribune Business sources confirmed that the China Export-Import Bank did indeed send a letter to the Government last week, setting out its terms and conditions for restarting Baha Mar’s construction and moving it towards completion. However, they were unable to confirm the contents.

This is not surprising, given that Baha Mar’s secured creditor has given every indication it does not want to invest a single cent more in the Cable Beach project.

However, it would have to finance CCA in completing construction, and would likely seek generous concessions from the Government in so doing - especially since the Prime Minister last year applied a $600 million price tag to the work.

The alleged incentives demanded, while perhaps not benefiting the bank or CCA directly, would certainly ‘sweeten the pot’ for any Baha Mar purchaser (likely Chinese), and result in a higher acquisition price - a key Chinese goal.

And, should the China Export-Import Bank elect not to sell, it could ‘sit and hold’ Baha Mar for years, given that it would incur minimal carrying costs in the form of taxes.

Granting the Chinese ‘wishes’ would also require that the same concessions be extended to Atlantis, and concerns are being raised that CCA would likely seek a preferential or ‘secured’ creditor status - further bumping Bahamians down the creditors queue.

Then there is the issue of whether CCA will seek to be paid its multi-million dollar pre-Chapter 11 costs, and whether the sums owed to all - or just some - of its Bahamian sub-contractors will be paid.

Mr D’Aguilar, meanwhile, urged Mr Fitzgerald to stick to education rather than business.

“I suggest that Minister Fitzgerald, who’s a good friend of mine, really focus on education and leave other matters,” he told Tribune Business.

“Our education system is in stress, and it’s generating loads of D-minus students who are totally unprepared to enter the workforce. I wish he would focus all his attention on that and correcting the problem.

“Since he took office I don’t think the situation’s improved, and he should leave business to successful businessmen, not unsuccessful ones.”