The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Democratic National Alliance’s (DNA) leader yesterday warned that the Baha Mar creditor payout process threatens to “open the floodgates” to litigation by foreign claimants, amid warnings that the Bahamas’ investment reputation is again under threat.

Branville McCartney told Tribune Business he had “no doubt” about the possibility of lawsuits being initiated, both in the Bahamas and abroad, by Baha Mar’s foreign creditors who view the payout process as ‘discriminatory’ in favour of Bahamians.

He also agreed that the “priority” being given to Bahamian creditors threatened to undermine this country’s reputation as a safe destination for foreign investors and companies, given that they appeared likely to recover little to nothing of the sums they are owed.

Tribune Business obtained independent corroboration yesterday that Baha Mar’s foreign creditors are monitoring the situation closely, and engaging attorneys - both in the Bahamas and the US - should legal action be required to enforce their rights.

A Bahamian attorney, who has been retained to act by several foreign creditors, told this newspaper that their clients were particularly unhappy about a creditor payout process that appears to discriminate in favour of Bahamians.

Speaking on condition of anonymity, as they were not authorised to talk by their clients, the attorney said: “What most are concerned about is that the focus seems to be on paying Bahamian companies and creditors. What about them?

“It’s manifestly unfair if you’re going to be paying Bahamian creditors and not paying them. Many of those companies still have equipment on the ground here. Litigation is brewing.

“It’s not looking good for the jurisdiction either, if this is how we’re going to treat foreigners. It’s not going to be perceived as a safe place. I appreciate what they’re [the Government and the Chinese] doing for Bahamians, and that it’s election time, but you have to be fair to other people who come here and do business. I’m hoping they see sense.”

The attorney added that all the agreements between China Construction America Bahamas (CCA) and its foreign sub-contractors called for contractual disputes to be arbitrated, and litigated, in New York.

They argued, though, that any judgments obtained in New York were unlikely to be enforceable in the Bahamas, and questioned whether CCA (Bahamas) had any assets against which to claim.

The latter query is likely to be of interest to CCA’s Bahamian sub-contractors, who must seek to obtain the multi-million dollar sums owed to them from the Chinese state-owned company - not via the Baha Mar claims process.

The bulk of the $74 owed to Bahamian contractors, some $58 million or more than two-thirds, is owed by CCA as opposed to Baha Mar.

While Prime Minister Perry Christie said CCA is supposed to settle with its sub-contractors and vendors as part of the Baha Mar construction completion deal, the reason for leaving this outside the claims process being administered by the Government and bank - that CCA had its own assets to claim against - is now being queried by the attorney.

Meanwhile, in typical receivership/liquidation proceedings, all unsecured creditors are supposed to ‘join the queue’ and be treated equally in terms of the recovery they will realise.

But in Baha Mar’s case, Bahamian creditors are leapfrogging to the front of the queue, thus leading to cries of discrimination from their foreign counterparts, who will likely be left to fight over any scraps left.

“This is just opening the floodgates to litigation with how this deal is progressing,” Mr McCartney warned. “I have no doubt that lawsuits will be initiated here and in other jurisdictions.

“The Baha Mar saga, I’m sure, will make it to the book stands as a New York best selling book. It’s just a complete disaster. There’s no doubt that foreigners will look at this situation and have second thoughts in terms of investing.”

The Government and China Export-Import Bank have been able to favour Bahamian creditors because the funding for the payouts is coming from the latter, not Baha Mar, taking the process outside the receivership and provisional liquidation.

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.

Many observers will likely be watching closely to see whether the Government is made whole, or paid first, by the creditor payout committee, which features representatives from the Chinese, Baha Mar’s receivers and two persons appointed by the Christie administration.

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.