The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A key Sarkis Izmirlian ally yesterday reiterated it would be “nonsensical” and “ground breaking” for Baha Mar’s contractor and its affiliates to declare bankruptcy as protection against his $1.642bn damages award.

Dionisio D’Aguilar, who sat on Baha Mar’s Board under the original developer, told Tribune Business it was “inconceivable” that a Chinese state-owned company such as China Construction America (CCA) Bahamas and its affiliates would ever make such a move given the embarrassment to Beijing as well as potential loss of confidence in doing business with its corporate entities.

Renewing his call for CCA to “settle”, rather than appeal the original New York State Supreme Court verdict, he spoke as Mr Izmirlian and the latter’s BML Properties vehicle yesterday voiced their opposition to the construction firm’s efforts to “stay” enforcement of the judgment on the basis that it has “already avoided answering for its wrongdoings for a decade”.

“BML Properties is opposed to CCA’s attempts to delay any enforcement in this case pending the outcome of the appeal, which could take years, without proper bonding or satisfactory guarantee,” they said. “CCA has avoided answering for its wrongdoings for a decade.

“However, BML Properties emphasises that it stands willing to work constructively with CCA and its parent company, China State Construction and Engineering Corporation, to reach a mutually satisfactory resolution.” Mr Izmirlian hit back after CCA, on Monday, obtained an “emergency stay” that temporarily prevents him from enforcing the $1.642bn damages award against the state-owned entity.

However, the injunction is to be “expedited” for a full hearing before the New York State Supreme Court’s appeal division - meaning that it may yet be overturned. If it is not in place, CCA has warned it will become insolvent and could be forced to place itself and its affiliates into bankruptcy in the US as well as liquidation in The Bahamas.

The latter, should it come to pass, would negatively impact the two Bahamian resorts - the British Colonial and Margaritaville Beach Resort (The Pointe) - that represent CCA’s two most valuable assets. This, CCA has warned, could put the “hundreds of jobs” reliant on both resorts in peril.

Mr D’Aguilar, though, voiced scepticism that such a scenario would materialise. “I think it’s inconceivable that a company ultimately owned by the Chinese state would ever declare bankruptcy,” he reiterated to Tribune Business. “That would be like the Water & Sewerage Corporation or Bahamas Power & Light or Bahamasair declaring bankruptcy.

“It would be just inconceivable that a corporation, company or entity owned by the state would ever consider taking such a move. I find it incredibly difficult to believe a company ultimately owned by the Chinese state would ever consider declaring bankruptcy. I’m sure that it would be the first time it has ever happened.”

Suggesting that a CCA insolvency would have wider ramifications by undermining global confidence in doing business with Chinese state-owned firms, Mr D’Aguilar said: “I would find it very odd and truly ground breaking if the Chinese state were to allow one of its entities to declare bankruptcy or Chapter 11.

“It’s nonsensical to think that a company that is ultimately owned by the Chinese state would declare bankruptcy. It’s inconceivable that would ever be the consideration. Obviously, the huge embarrassment and loss of credibility that those companies would endure would be significant.

“No. They want to appeal, and in the US you can only appeal if you can afford to. They are saying they clearly cannot afford to appeal so settle and see where the number is at, then talk to your parent and see what can be done. This matter needs to be settled,” Mr D’Aguilar continued.

“I would encourage them, as I did last week, to settle... and as they were encouraged to do. They should have done it when Judge Andrew Borrok strenuously encouraged both parties to settle. Anyway, it is what it is.”

CCA moved rapidly to secure its injunction because it was unable to obtain the near-$2bn bond required by New York State Supreme Court rules to gain an “automatic stay” of any judgment it issues. Branding the sum awarded against it as “breathtaking”, CCA alleged that the damages handed to Mr Izmirlian are “several times’ the combined value” of itself and its affiliates.

A surety bond broker, used by CCA as an expert witness, besides asserting that there is “no ability” to use the two Bahamian resorts as collateral for the security demanded by the New York court also argued that financiers will shy away from Bahamas-based assets due to perceived challenges with enforcing agreements and potentially having to deal with this nation’s court system.

Mark Goodman, an attorney with CCA’s US attorneys, Debevoise & Plimpton, in a November 1, 2024, affidavit alleged: “Defendants are ongoing businesses facing a judgment that is several times their combined value even under the most optimistic assumptions. The judgment is far more than any defendant could possibly satisfy.”

Describing CCA as a New Jersey-based construction company whose primary asset is the equity ownership stakes it holds in its subsidiaries, Mr Goodman sought to portray the contractor and its affiliates as having minimal worth.

He added that China State Construction and Engineering Corporation (Bahamas) was merely a Bahamian special purpose vehicle (SPV) “that has no meaningful assets” after it lost its $150m preference share investment when Baha Mar was liquidated, while its $248m counterclaim against Mr Izmirlian was last month dismissed by the New York court.

As for CCA’s own Bahamian subsidiary, CCA Bahamas, he added that its “principal assets are its ownership interests in two subsidiaries, which together own and operate two hotels in Nassau, Bahamas, and no surety firm would accept its assets as a form of collateral on a supersedeas bond”.

“Absent a stay of enforcement, some or all of the defendants may be forced to file for bankruptcy in the US or initiate liquidation proceedings in The Bahamas,” Mr Goodman added. “In this case, bankruptcy or insolvency proceedings would harm not only defendants but non-parties as well.

“The two hotels CCA Bahamas owns employ hundreds of people. And CCA provides shared services, including communications, accounting, information technology and other general administration services, to non-party affiliates engaged in ongoing construction projects.

“Defendants have diligently sought to avoid this outcome. They approached several bonding companies, but none were willing to provide a bond in any amount. A discretionary stay of enforcement is the only means by which defendants can preserve their assets while pursuing their right to appeal.”