Bahamas Government Seeks To Seize Control Of Baha Mar
The Bahamas government will attempt to seize control of the stalled $3.5 billion Baha Mar project Monday via a petition filed Thursday with the Bahamas Supreme Court, said Perry Christie, the country’s prime minister, in a televised address.
Perry’s action follows what he termed the failure of negotiations this week involving the resort’s developer, Baha Mar Ltd., its primary contractor, China Construction of America Inc. (CCA), and its chief creditor, China’s Export-Import Bank (Eximbank). In three days of negotiations in Beijing this week, the parties discussed an agreement that would have prompted the resort’s completion and opening following Baha Mar Ltd.’s Chapter 11 filing in a U.S. court earlier this month.
“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,” said Christie. “Consequently, on the advice of our Bahamian, U.K. and U.S. lawyers, the attorney general has filed a winding up petition against the Bahamian entities that filed for Chapter 11 protection in the United States.”
Christie explained, “These compulsory 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 Mr. Izmirlian.” Sarkis Izmirlian is Baha Mar Ltd.’s chairman.
“These liquidators, if appointed by the court, will be neutral and impartial professionals,” Christie said. “The role of the liquidators will be to expedite the resolution of the matter and to prepare a plan for the restructuring of Baha Mar that will result in the earliest possible completion and opening of the project.”
Baha Mar Ltd. officials issued a tersely worded reaction to Christie’s comments, stressing that the negotiations have not ended. “The Bahamian government’s decision to seek a winding up of Baha Mar is both unnecessary and reactionary, puts Baha Mar’s staff and assets at severe risk, and significantly jeopardizes the future of the resort,” they said.
“Baha Mar officials have been and continue to be in China engaged in ongoing discussions with both the general contractor and the lender,” the statement says. “Yet notwithstanding those good faith discussions, the government announced in the middle of the night it will seek to liquidate Baha Mar, creating a distraction from these ongoing discussions.”
The statement adds, “Baha Mar believes [the] parties have developed an understanding of what is needed to finish the project and are willing to provide the required financing. The government left the ongoing discussions to follow its own path rather than to continue to act in a mediator capacity between the private parties as it had announced it would do.”
Christie said the negotiations broke down amidst requests from Baha Mar Ltd. for additional funding to complete the stalled project, and its desire to extend the talks.
“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 [and] to cover other liabilities and deferral of principal and the initial balloon payments under the loan facility with Eximbank,” said Christie.
“Both Eximbank and CCA demonstrated flexibility in meeting Baha Mar’s expanded funding requirements and project completion date,” he said. “This notwithstanding, Baha Mar still wanted an extended period for further negotiations which, however, was not acceptable.”
Christie also charged that “Baha Mar was not prepared to agree to terms which would have included the discontinuance of their Chapter 11 proceedings in the United States and their legal action against China Construction in the United Kingdom.” He said the terms “were demanded by Eximbank and China Construction, and supported by the government, as conditions to any agreement for additional funding, resumption of construction and project completion date.”
Baha Mar’s Chapter 11 filing has also placed the project in jeopardy, Christie said. “[Chapter 11] papers filed in the U.S. suggest that if Baha Mar’s strategy 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 U.S., the fate of this Bahamian project, its Bahamian employees and the international reputation of the sovereign nation of the Bahamas would be in jeopardy,” he said.
Not surprisingly, Baha Mar officials have a different interpretation, saying the company “has not refused to dismiss the Chapter 11. We have agreed to dismiss the case as soon as parties have a mutually-beneficial binding agreement to the benefit of all parties.”
Baha Mar officials also dismissed Christie’s assertion that their Chapter 11 filing violated the Bahamas’ sovereignty, saying Bahamas law “provides for recognition of proceedings such as Chapter 11,” and adding “The [filing] is not an attack on the sovereignty of the country in any manner.”
Baha Mar officials added that they have invested heavily in the mega-resort. “The project continued to survive, and employees were paid, in no small part due to contributions of more than $18 million by the Izmirlian family,” said the statement. The developers have invested “over $900 million in the project.”
Baha Mar officials are “evaluating alternatives with respect to addressing the government's precipitous action,” they said. “We urge the government of the Bahamas not to seize private party assets and to allow the private parties to come to an agreement that would allow for the completion and opening of Baha Mar as soon as possible.”
On Friday CCA representatives issued the following statement: "CCA remains committed to working with the Bahamian government to arrive at a viable plan that results in the expedited opening of this landmark project."
Meanwhile Christie said the Bahamas government has arranged for a second payment of salaries of Baha Mar’s Bahamian employees. “It goes without saying that the completion of the Baha Mar resort is a matter of the utmost national importance, Christie added. “Baha Mar must open.”
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