PHOTO: Sarkis Izmirlian, the original developer of Baha Mar, is seeking to regain control of the mega-resort. (Photo by Brian Major)
The original developer of the bankrupt $3.5 billion Baha Mar mega-resort is furtively seeking to re-enter the picture following the Bahamas development’s sale last week. Yet Sarkis Izmirlian’s BMD Holdings faces an imperfect scenario with several unfortunate obstacles to re-acquiring control of the project.
On Monday BMD Holdings officials complained of not receiving a response to their “superior” proposal to purchase Baha Mar from Perfect Luck Holdings Limited, a “special purpose vehicle” created this month by Baha Mar financier China Export-Import Bank (CEXIM) to purchase the stalled mega resort’s real estate assets out of receivership.
The sale to the ironically named Perfect Luck is considered a preliminary step in a process to complete Baha Mar’s construction prior to its sale to an “ultimate buyer.”
Despite submitting a “bona fide proposal” to purchase Baha Mar from CEXIM, the bank has “bizarrely…not acknowledged receipt of my proposal nor has anyone associated with either the bank , the receivers or ‘Perfect Luck’ made contact with us,” said Izmirlian in a letter to Liu Lange, the bank’s vice chairman, which also copied Perry Christie, the Bahamas prime minister.
Izmirlian labeled the Baha Mar sales process, under which the project’s receivers conducted a public search for a buyer for the shuttered property, “an intricate fabrication.” He said “bidders were not given information and were forbidden to meet with stakeholders or to discuss the status of construction with any of the relevant parties.”
Izmirlain further said the Bahamas Supreme Court’s approval of the sale came as “lawyers were able to craft a story sufficiently plausible for the bank to sell Baha Mar to itself and conduct a further sale of Baha Mar in even more secrecy.”
Christie’s office last week countered Izmirlian’s assertions, calling the bidding “a lengthy marketing process by the receivers” with “the resulting sale of the assets to Perfect Luck overseen and approved by the Bahamas Supreme Court.” Perfect Luck now “may sell the resort to whomever it wishes, subject to the proposed purchaser being acceptable to the government.”
Christie’s statement ostensibly means the government could bar any developer besides BMD Holdings from buying Baha Mar. However, the prime minister showed no inclination to back Izmirlian’s latest bid.
Indeed, Christie seemed to reproach Izmirlian for his earlier strategy to pursue Chapter 11 protection in the United States, a move Bahamas government officials at the time described as an affront to the nation’s sovereignty. The Chapter 11 request was ultimately denied.
“Sarkis Izmirlian, without any prior notice, arranged for the Baha Mar companies to file Chapter 11 bankruptcy proceedings in the United States,” Christie’s statement reads. Since then the developer “has had the opportunity to participate in discussions and the process surrounding the future of the resort,” the statement continues.
“If he is in a position to make a credible proposal to acquire Baha Mar from Perfect Luck, then he is free to do so.”
Two of Christie’s “three stated primary objectives” have been achieved, namely “remobilization” of Baha Mar’s completion and CEXIM’s creation of “a substantial fund for the payment of creditors’ claims and former Baha Mar Bahamian employees,” whom his statement said “are already being paid.”
“The third objective is to ensure that Baha Mar is sold to a world class hotel and casino operator. The government will continue to work tirelessly to ensure that this objective is fulfilled,” the statement adds.
There is plenty at stake for the Izmirlian. The Bahamas Tribune reports his original Baha Mar companies have been placed into full liquidation under the Supreme Court’s supervision. The developer stands to lose an estimated $800 to $900 million equity investment in Baha Mar.
The Tribune report notes CEXIM and China Construction America (CCA), the project’s general contractor, “have no wish to deal with Izmirlian” and are seeking to exclude him from re-entering the resort’s development.
The Baha Mar impasse began with Izmirlian’s allegations of significant delays and construction errors on CCA’s part and the developer has repeatedly called for CCA to be removed from the project. The prospect appears unlikely as CEXIM and CCA are both effectively owned by China’s government.
Izmirlian also regards CEXIM and Perfect Luck as analogous. “I sent you two weeks ago today a bona fide proposal to buy Baha Mar at a price superior to any offer ‘Perfect Luck’ or CEXIM has received appear,” he said in Monday’s letter.
“At this stage no one feels lucky: the thousands of Bahamians out of a job, the contractors not paid, the foreign creditors ignored, the shareholder of CEXIM who is forced to take an enormous write-off on its debt,” Izmirlian wrote.
Should Izmirlain ultimately prove unsuccessful the question remains exactly whom Baha Mar’s “ultimate buyer” might be. Bahamas media reports have suggested “a Chinese group or consortium” may be preferred by CEXIM.
For his part, the developer isn’t giving up easily. “We present the best option to complete the project and affirm the policy success of CEXIM,” he said.