The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Resorts World Bimini’s majority owner is asserting that “any hope” of turning the troubled resort and its $885m liabilities around was “thwarted” by COVID-19 as it blasted efforts to “malign” its reputation.

Genting Americas, in its long-awaited riposte to the $600m damages claim filed against it by Gerardo Capo’s RAV Bahamas, slammed the resort’s original developer for supplying little to no evidence to back multiple fraud, negligence and other claims including that it was “impossible” to spend $795m on Resorts World’s construction.

The multi-billion Malaysian conglomerate refuted RAV’s allegations that the property, which features a 300-room resort and casino, cost just $240m to construct by arguing that its financial statements “clearly show” the actual price tag by year-end 2022 was almost double that at $432m.

Genting, which holds a controlling 78 percent ownership interest in Resorts World Bimini’s immediate holding company, is urging the south Florida federal court to dismiss the lawsuit filed by RAV Bahamas, its minority partner, on numerous legal technical grounds.

Stung by claims from Mr Capo and his company, which holds the 22 percent minority interest in Bimini’s so-called ‘anchor’ project, that it  turned Resorts World Bimini into a “financial wasteland” via a near-billion dollar liability “dump”, Genting is arguing that the shareholder agreement governing the two sides’ relationship mandates that any disputes be dealt with via arbitration in The Bahamas rather than the US federal courts.

It is also asserting that RAV Bahamas’ claim is fatally flawed because it fails to name BB Investment Holdings, the entity that directly holds Genting’s 78 percent ownership interest, as a defendant. And the Malaysian conglomerate is also arguing that the lawsuit cannot move forward because it is time barred.

Genting, in a statement issued to investors and the markets via the Malaysian stock exchange, yesterday said: “The Board of Directors of Genting Malaysia wishes to inform that on November 22, 2024, Genting Americas filed a motion to dismiss the complaint filed by RAV Bahamas in the US district court, southern district of Florida.

“Genting seeks dismissal of the complaint on multiple grounds, including that this is a shareholder dispute and therefore should be dealt with pursuant to the shareholders’ agreement between the shareholders of BB Entertainment in a forum other than the US court.

“The claims are time-barred, and the complaint fails to adequately allege facts showing that the required elements for each claim have been met. Genting continues to firmly believe that the complaint is baseless and without merit, and will continue to defend against these claims.” BB Entertainment is Resorts World Bimini’s immediate holding vehicle, and is 78 percent owned by Genting via BB Investment Holdings.

Mr Capo and RAV Bahamas are accusing their Malaysian partner of perpetrating “a massive and co-ordinated fraud” that has left the $25.5m in real estate and other assets they contributed to the deal “essentially worthless”. 

They are effectively accusing Genting of using its 78 percent majority ownership, plus Board and management control, to conceal how it funnelled hundreds of millions of dollars in liabilities incurred elsewhere in its global empire on to the Bimini resort’s books.

With relations between the property’s two shareholders likely at an all-time low, Genting has now hit back at RAV Bahamas’ “self-serving narrative” surrounding Resorts World Bimini’s woes by arguing that its representatives were fully aware of the property’s financial plight and attempts to reverse the situation.

In particular, the Malaysian conglomerate said it has been subsidising the project’s losses for more than a decade via loans made from other entities within the Genting empire. It added that RAV Bahamas executives were fully aware of this and the ultimately futile effort to reverse the loss-making trend.

“Since its opening in 2016, the Bimini resort has struggled against numerous challenges and headwinds, and ultimately has not done as well as its two shareholders had hoped,” Genting admitted. “As the financial statements RAV attached to its complaint reflect, the Bimini resort has each year operated at a loss as it has struggled to generate revenues covering its operating and start-up costs, as well as the costs from various hurricanes over the last ten years in the Caribbean.

“Any hope of turning the business around was then thwarted by the COVID-19 pandemic, which forced the Bimini resort to close for most of 2020 and required it to operate at reduced capacity through 2022. RAV brings this action alleging fraud and negligence, claiming that BB Entertainment’s poor financial performance is due to an alleged fraud to record ‘illegitimate expenses and debts [on] BB Entertainment’s books and accounting records, which did not belong to BB Entertainment’ .

“RAV speculates that BB Entertainment’s construction and operating costs for the resort are so excessive that they must be the result of BB Entertainment recording unspecified liabilities of other unrelated corporate entities of the Genting Group on BB Entertainment’s financial statements. But RAV Bahamas does not adequately plead facts supporting this alternative theory of BB Entertainment’s financial struggles.”

Pointing out that the two sides’ shareholder agreement “includes a dispute resolution provision requiring all disputes to be arbitrated or litigated in The Bahamas”, Genting added: “In its complaint, RAV lays out a self-serving narrative about BB Entertainment and its business, based on which it maligns and disparages Genting Americas for its purported role in BB Entertainment.

“RAV makes general allegations about overlapping officers and directors between Genting Americas and BB Entertainment; loans that BB Entertainment received from Genting Malaysia subsidiaries; the timeliness of furnishing RAV with financial statements; and the accuracy of those statements....

“However, many of those allegations concern practices and procedures that were standard or well-known to RAV - in some cases, in which it participated -  and not concealed from it. Other allegations are pure conjecture and not factually supported, and others still are contradicted by the very exhibits that RAV itself has put into the record.”

RAV Bahamas, in its original lawsuit, claimed Genting “has deliberately kneecapped” its attempts to gain a true understanding of Resorts World Bimini’s financial position by denying “full access” to the property’s financial records and its calls for an independent audit.

The financial statements for BB Entertainment reveal that the project has consistently incurred annual losses amounting to tens of millions of dollars ever since RAV Bahamas teamed with Genting some 12 years ago in 2012, with total liabilities standing at $890m at year-end 2022.

Yet Genting argued that its legal filings had failed to identify which loans were allegedly fraudulent and who had provided them, arguing that in contrast to RAV Bahamas’ assertions the financial statements provided an accurate picture of the liabilities being incurred from Resorts World Bimini “receiving loans from other Genting entities to cover BB Entertainment’s expenses”.

“As a participant on the BB Entertainment Board, where such matters were discussed, RAV was also informed of the loans that BB Entertainment received from entities in the Genting Group, and it received information about BB Entertainment’s liabilities.... As a result, by October 2020, RAV knew that BB Entertainment had reported liabilities of $608m,” Genting’s legal filings asserted.

“RAV also claims that fraud is shown by the fact that construction of the Bimini resort allegedly cost just $240m, far less than what was booked by BB Entertainment. But the financial statements attached to the complaint plainly show that the actual construction costs of the Bimini resort far exceeded the $240m that RAV alleges were spent.

“The 2022 year-end financials clearly show that BB Entertainment had incurred over $432m in costs for property, plant and equipment expenses for the construction of the resort. Among other things, BB Entertainment purchased furniture and equipment for the hotel and casino, which is not included in RAV’s estimation of construction expenses. RAV pleads nothing showing how that information is false or fraudulent.”

And RAV Bahamas’ assertion that Resorts World Bimini’s $885m liabilities at year-end 2022 far exceeded those for the entire Genting group were labelled as false and inaccurate, as those owed by the latter exceeded $3.5bn.

BB Entertainment’s 2022 audited financials saw the EY (Ernst & Young) accounting firm qualify the report by noting a “material uncertainty related to going concern”. It wrote: “We draw attention to note two in the financial statements, which indicates that the company incurred a net loss of $151.284m during the year ended December 31, 2022.

“As of that date, the company’s current liabilities exceeded its current assets by $70.546m and had a net equity deficit of $693.665m. As stated in note two, these events or conditions, along with other matters as set forth in note two indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.”

That year’s $151.284m loss followed $114.22m worth of ‘red ink’ that Resorts World Bimini incurred in 2021, which both exceeded the $105.581m loss generated in 2020 when the COVID-19 pandemic was at its height and the $69.624m hit sustained in 2019.

BB Entertainment’s financials showed that, at year-end 2022, the company was effectively insolvent with some $191.511m in assets dwarfed by $885.176m in total liabilities to produce the $693.665m solvency deficiency. Of the $191.511m in total assets, the majority - $165.254m - represented the value of Resorts World Bimini’s real estate, with its holding entity possessing just under $3m in cash and equivalents.

The majority of BB Entertainment’s liabilities, some $795.452m, was described in the financials as “borrowings” from BB Investment Holdings, the entity through which Genting holds its 78 percent majority stake in the project. Some $578.848m of this sum was said to be “interest bearing” at a rate of Bahamian Prime plus 5 percent, which would be 9.25 percent.