The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s original developer last night urged the Government to “end the speculation” by releasing all agreements related to the project’s opening, as his verbal battle with the Government re-ignited following a lull of several months.

Sarkis Izmirlian and his BMD Holdings vehicle said they “stand by” their previous statement that Baha Mar is a ‘Potemkin hotel’ being used “to deceive Bahamians into thinking the situation is better than it really is”, as the Christie administration pushed back hard.

A Government statement, which appeared to come from the Attorney General’s Office, challenged Mr Izmirlian’s assertion that the Chapter 11 bankruptcy protection process he initiated would have produced a speedier resolution to Baha Mar’s woes than the Supreme Court-supervised mechanism eventually used.

The Government, again playing up the sovereignty/nationalist line, described Mr Izmirlian’s weekend assertions as “unpatriotic”, and argued that his decision to head to Delaware meant “he lost all credibility as someone who could claim to have the interest of his Bahamian employees or contractors at heart”.

Arguing that Mr Izmirlian’s Chapter 11 restructuring plan had been “devoid of details”, the Government said this exposed the fact that the original developer lacked the necessary financing to complete Baha Mar and bring it out of Chapter 11 bankruptcy protection.

Questioning how Mr Izmirlian would have obtained new debt financing, given that all Baha Mar’s assets had been mortgaged to its $2.45 billion lender, the China Export-Import Bank, the Government said the constant statements to the media were merely attempts to deflect from his “failure”.

And, taking on Mr Izmirlian’s statement that he remained “ready, willing and able” to purchase Baha Mar, the Government cast doubt on whether the original developer had since obtained the necessary financing, suggesting neither itself nor Baha Mar’s receivers had seen any proof of funding or “credible offer”.

However, Mr Izmirlian and BMD Holdings last night held their ground, reiterating that Baha Mar’s physical construction had yet to be completed amid ongoing uncertainty over when the multi-billion dollar development will be fully open.

“The fact is Baha Mar is not completed and there is no clear, definitive commitment or assurance that is available to date before the public when Baha Mar will be completed and really opened, if at all,” the original developer said.

“The issue is not the Chapter 11 process, which was the necessary and the appropriate path to pursue in order to be able to move forward to complete and open Baha Mar as quickly as possible.

“The issue is Baha Mar is not open, not completed, and no one is saying if and when that will truly happen. The easiest way for the Government to put a definitive end to the speculation is to release all agreements for the completion of Baha Mar with CCA, CTFE and China Export-Import Bank. The facts can speak for themselves.”

Mr Izmirlian’s final statement deliberately targets a sensitive spot for the Christie administration, namely its failure to deliver on recent promises to ‘unseal’ its agreement with the China Export-Import Bank for Baha Mar’s construction completion.

Prime Minister Perry Christie recently said he had asked Allyson Maynard-Gibson, the attorney general, to begin the process of obtaining Supreme Court permission to release those documents. However, they have yet to be produced to the Bahamian people.

And, given that Chow Tai Fook Enterprises (CTFE) has yet to complete Baha Mar’s purchase from the China Export-Import Bank, it is also unclear whether a completed Heads of Agreement between the former and the Government will be available.

The Christie administration, meanwhile, sought to downplay Tribune Business’s revelation last week that the opening date for Baha Mar’s 200-room Rosewood property has been pushed back from November/December 2017 to Spring next year.

“The fact that independent operators of other parts of the resort have suggested deferred or staggered opening dates with respect to their hotel brands does not in any way detract from the extraordinary effort and progress that has been made toward the completion of construction and opening of the resort, nor does its cast any doubt on the target date for the soft opening of other parts of the resort,” the Government said.

“It is simply a reflection of the commercial realities that exist, due largely to the state in which the hotel was left by the former developer after filing for bankruptcy, and the need by these brands to ensure that they are in a position to meet the qualitative expectations of their clientele when they do open.”

Rosewood yesterday said CTFE was investing a further $35 million in its Baha Mar resort to ensure it exceeded guest expectations, confirming the Spring 2018 opening.

The Government then took issue with Mr Izmirlian’s claim that the two-year delay in Baha Mar opening has cost the Bahamas $4 billion in revenues, together with 15,000 direct and indirect jobs and $500 million in tax revenues.

It argued that these estimates were “meaningless”, given that the original developer and BMD Holdings did not know how long the Chapter 11 process would have taken if it had continued to the end.

Stating that Mr Izmirlian had “well over 18 months” to submit a bid to reacquire Baha Mar, the Government said no offer was submitted.

“The Government has never seen a credible offer at all from BMD, nor any evidence of funding, and apparently neither have the receiver-managers as part of the Supreme Court supervised process for the sale of Baha Mar,” the Government statement said.

“The irresistible inference, indeed the inescapable conclusion, must be that there is no such funding, and therefore BMD’s motivation to continue to ventilate these issues in the press is little more than petulant annoyance in not having succeeded in delaying the project indefinitely in Chapter 11 proceedings in the US.

“Indeed, once Mr Izmirlian decided to file for bankruptcy in a foreign court, he lost all credibility as someone who could claim to have the interest of his Bahamian employees or contractors at heart.”

Whether the Chapter 11 process would have produced a faster, more equitable resolution of the Baha Mar dispute is now impossible to determine, given how events have played out over the past two years.

Another key, unresolved question is whether Mr Izmirlian had the necessary financing, or would have been able to obtain it, to get Baha Mar out of Chapter 11 protection and complete the project.

The Government’s argument is that he did not, and that the invoking of Chapter 11 was merely a strategic move to gain negotiating leverage over the China Export-Import Bank in a bid to force it to take a ‘haircut’ on the debt owed to it, and also to remove CCA as the project’s contractor.

Allowing Baha Mar to stay in Chapter 11 would have tied the project up “for years and years”, the Government said yesterday, a development that could have threatened its re-election prospects given how much the economy was depending on this project.

What Chapter 11 would have done, though, was enable Mr Izmirlian to remain in control of the development rather than it be put into provisional liquidation, then into the hands of the China Export-Import Bank.

While the Government yesterday accused him of protecting his “self-interest”, with an $800-$900 million investment by his family at stake, and CCA’s failure to complete bleeding him dry financially, Mr Izmirlian could hardly be faulted for this.

“The constant references to the ‘Chapter 11 reorganisation process’, as if this were some silver bullet for rescuing the project, also needs to be put down,” the Government said yesterday.

“As the Government has indicated on more than one occasion, Baha Mar’s ‘plan’ for the restructuring of the resort in Chapter 11 was devoid of detail, and brought into stark focus the fact that the original developer did not have the funding required to complete the resort.

“The plan called for nothing more than the immediate closure and shuttering of the site, whilst the developer sought new sources of finance, however long this would have taken, with thousands of jobs being lost in the meantime,” it added.

“The plan did not directly address how the developer would deal with its secured creditor, CEXIM Bank, who had extensive security over the resort for the lending they had made in sums exceeding $2.4 billion. Given an opportunity to do so, BMD did not and could not have proposed a viable path to complete and open Baha Mar.”

The Government also noted how, out of the $80 million in financing offered by Mr Izmirlian’s Granite Ventures vehicle to finance Baha Mar while in Chapter 11, just $30 million was approved by the Delaware court. And only “a paltry” $15 million was eventually forthcoming.

However, this assertion neglects to mention that the $80 million promised by Mr Izmirlian was impeded by the Government, as the necessary Central Bank and Investments Board approvals were never given.

The Government also argued that the proceeds of Baha Mar’s $192 million claim against CCA’s parent, initiated in the UK high court, would have gone to the China Export-Import Bank - rather than Bahamian creditors - once the project was in provisional liquidation, then receivership.

Mr Izmirlian and Granite Ventures tried to acquire the rights to these proceedings, but were refused by the Supreme Court. The Government said it would have been too expensive, and risky, for the provisional liquidators to pursue a claim touted by Mr Izmirlian as one of the creditors’ best recovery sources.