Bahamas government moves on Baha Mar megaresort

Baha Mar attempted to negotiate a deal with its lender, the Export-Import Bank of China (EXIM Bank) and its major contractor China State Construction Engineering Corporation (CSCEC) after it filed for Chapter 11 bankruptcy in the United States on June 29.

“It goes without saying that the completion of the Baha Mar resort is a matter of the utmost national importance,” the prime minister said in nationally televised address. “Baha Mar must open.

“Whilst we certainly remain open to further discussions, my government has taken the decision to seek to bring the Baha Mar development project under the control and supervision of the Bahamian Supreme Court, right here in The Bahamas.

“Consequently, on the advice of our Bahamian, UK, and US lawyers, the attorney general has today filed a winding-up petition in the Bahamas Supreme Court against the 14 Bahamian entities that filed for Chapter 11 protection in the United States at the end of June.

“These compulsory or involuntary winding-up proceedings are designed to work in very similar terms as a Chapter 11 but with the stark difference that they will be controlled by provisional liquidators under the supervision of the Bahamian courts rather than being controlled by [Baha Mar CEO Sarkis] Izmirlian.

“These liquidators, if appointed by the court, will be neutral and impartial professionals of the highest quality and of impeccable credentials.”

Christie explained that the role of the liquidators will be to expedite a resolution of the Baha Mar debacle and to prepare a plan for its restructuring.

He added that EXIM Bank and China Construction America (CCA) Bahamas “have pledged their willingness to work with the Bahamas government in their common objective for the completion and opening of the project in the shortest possible time”.

Baha Mar filed for Chapter 11 bankruptcy in the US state of Delaware.

It also filed a lawsuit in the United Kingdom against CSCEC.

A US judge a day later granted the company creditor protection and access to debtor in possession (DIP) funds, which Baha Mar said was the only way it could complete the resort.

However, a Bahamian court has to approve those orders for them to be enforced in this jurisdiction.

The court matter in The Bahamas was adjourned to allow “good faith negotiations” to continue between the parties.

That matter resumes on Monday.

Sovereignty

Christie said the government cannot allow the US orders to be approved.

“Papers filed in the US suggest that, if Baha Mar’s strategy in the US was allowed to continue, there would not only be a substantial delay in the completion of the project but there would also be great uncertainty as to whether the developer would ever be in a position to complete the project at all,” he said.

“Further, were the processes to continue in the US, the fate of this Bahamian project, its Bahamian employees and the international reputation of the sovereign nation of The Bahamas would be in jeopardy.

“Consequently, and in addition, the attorney general is challenging Baha Mar’s application to the Supreme Court of The Bahamas to recognize and accept the jurisdiction of the Delaware court in The Bahamas.

“This is not just a matter of national sovereignty.

“There should be a Bahamian solution to this Bahamian issue and the majority of the key parties in this matter recognize and support that position.”

The prime minister said that this move is “not designed to punish Baha Mar” nor to destroy it.

“On the contrary, the purpose of the provisional liquidation is to enable the appointment of a neutral party to take control of the process and to work with the key stakeholders under the supervision of the Bahamian court to prepare a strategic and workable road map for the completion and opening of the resort,” he said.

“Such a solution will recognize and respect the rights and legitimate interests of the key parties, including Baha Mar and the Bahamian people.”

Negotiations

In his address, Christie said in the recent negotiations, parties worked around the clock to arrive at a solution.

But he said having made considerable progress, the talks ended without agreement.

A source close to the matter said Izmirlian asked the bank for an additional $600 million to complete the project and deal with operational expenses.

The source indicated that the bank was willing to provide this additional funding but was unable to receive a guarantee from the developer.

“It transpired at the Beijing negotiations that Baha Mar’s additional funding requirements had increased considerably, and now included not only funding for completion of construction, but funding to meet start-up and operating expenses; funding to cover other liabilities and deferral of principal and the initial balloon payments under the loan facility with EXIM Bank,” Christie said.

“I am advised that both EXIM Bank and China Construction Company demonstrated flexibility in meeting Baha Mar’s expanded funding requirements, and project completion date.

“This notwithstanding, Baha Mar still wanted an extended period for further negotiations which, however, was not acceptable.

“Baha Mar was also not prepared to agree to terms which would have included the immediate discontinuance of their Chapter 11 bankruptcy proceedings in the United States and their legal action against China Construction in the United Kingdom.

“These terms were demanded by EXIM Bank and China Construction [America], and supported by the government, as conditions to any agreement for additional funding, resumption of construction and project completion date.”

Christie said he is “absolutely convinced” that the government is on the right path.

“While it is true that there are still major obstacles to be overcome, I remain extremely optimistic about the end result, one that will not only ensure the employment of thousands of Bahamians but the emergence as well of a resort destined for great success in the tourism industry of The Bahamas and of the region.”


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