The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s creditor payout committee yesterday estimated that up to 200 Bahamian companies will receive a collective $8-$10 million, as it begins cheque distributions to more “low hanging fruit”.

James Smith, the committee’s chairman, told Tribune Business that the payments to unsecured corporate creditors owed $500,000 or less, which began yesterday, represent the next phase in its work.

Suggesting that the committee’s work was “moving along quite smoothly”, the former finance minister and Central Bank governor said it was “on target” to complete the Bahamian creditor payouts by year-end 2016.

“We just started the payments today, and have actually sent out e-mails to those on the list,” Mr Smith told Tribune Business.

“We don’t know what the response will be, but we’re asking them to come in, collect the cheque and sign the release form.

“Preliminary estimates indicate that there are about 150 to 200 companies/persons, and the payout would be in the region of $8 million to $10 million.”

To qualify, apart from being owed $500,000 or less when Baha Mar filed for Chapter 11 bankruptcy protection in June 2015, the Bahamian vendors and contractors must also have submitted all necessary documentation to prove their claim.

And the sum they claim is owed must match, or be “only slightly different”, from the amounts in Baha Mar’s records.

“It’s really the low hanging fruit that we can deal with expeditiously,” Mr Smith told Tribune Business of those Bahamian creditors targeted in the latest payout phase.

“We’re moving along quite smoothly we hope. These are basically the minor claims or ones where there is no dispute. Their figures line up with Baha Mar’s when we do the reconciliations.”

He added: “It’s not so much the size of the business, as we have some very large firms that have small $200,000 claims.

“This is just one part of the larger process. We put them altogether, the claims, and go after the ones we can deal with swiftly, leaving some of the far more difficult cases.”

Having paid nearly 2,000 ex-Baha Mar staff what the committee deems they are owed in terms of outstanding salary, severance pay and other benefits, the creditor claims payout committee is now moving to deal with the corporate claimants.

The former staff, and businesses that fall into the ‘owed $500,000 or less’ category, are likely to be ‘made whole’ and receive 100 per cent of what they are owed.

“I guess the important issue is complete documentation,” Mr Smith said of the corporate creditors, adding that his earlier concerns about inadequate ‘proof of claim’ had “for the most part” been addressed

“Most of this stuff had been submitted in the provisional liquidation process, so to find duplicates should not be a hard stretch,” he added.

The Bahamian creditor payouts are being financed by Perfect Luck Claims, the special purpose vehicle (SPV) created by Baha Mar’s secured creditor, the China Export-Import Bank.

The Chinese state-owned institution has provided around $100 million in financing to compensate Baha Mar’s Bahamian creditors, although it is unclear whether anything will be left over for ex-foreign staff and creditors.

For those creditors with “large variances” between their claims, and what the payout committee believes is due, Mr Smith suggested that “lengthy negotiations” was unlikely to be an option.

Given that many Bahamian companies had likely already written-off or discounted the sums owed by Baha Mar, the former minister suggested they would likely be amenable to receiving what the committee was offering.

“We’ll likely just make an offer first to avoid any lengthy negotiations,” Mr Smith told Tribune Business. “It’s a gratis payment, and some of these companies will have already written-off what they are owed.

“If they’ve submitted a claim for $600,000, and the committee is offering $520,000, they may say: ‘We’ll take it’. They will probably have written it off, not expecting anything, and couldn’t get anything from the formal liquidation process. Their response is likely to be: We’ll take it.”

Mr Smith’s “gratis” comment refers to the fact that the China Export-Import Bank is under no obligation to make any payment to the Bahamian creditors, given that the debts were owed by Baha Mar and its original developer, Sarkis Izmirlian.

The bank has undertaken to make the payments as part of the agreement reached with the Christie administration for Baha Mar’s construction completion, the Government having prioritised payment of all outstanding sums owed to Bahamian contractors, vendors and former Baha Mar staff.

The payouts being made by Mr Smith and the committee, though, are only to direct creditors of Baha Mar. Bahamian contractors who were hired by the project’s main contractor, China Construction America (CCA), have to receive their compensation from it.

Mr Smith said the payout committee, which includes the Government’s liquidation claims adviser, Grant Lyons, plus representatives from China Export-Import Bank, CCA and the Deloitte & Touche receivers, was now starting to look at larger claims worth $500,000 or more.

The biggest Bahamian creditor is the Government, and its various agencies, who claimed to be owed $59 million when it petitioned to put Baha Mar into liquidation last year.

The majority of this sum, some $26 million, was said to be owed to the Bahamas Electricity Corporation (BEC), with the remainder spread around the likes of NIB, Water & Sewerage, the Gaming Board and the Treasury in terms of unpaid taxes.

Of Baha Mar’s 20 largest unsecured creditors at the time of the Chapter 11 filing, only a few besides BEC were Bahamian.

They were Osprey’s joint venture with Yates, valued at $5.281 million; TBI Caribbean’s $2.353 million; Cable Bahamas with $1.435 million; Cable Beach Resort Association at $1.219 million; and Island Site Development with $1.153 million.

“The Committee expects to meet its deadline for completion at the end of December 2016,” Mr Smith told Tribune Business. “We’re right on target for that.”