Last updated: 01:34 PM ET, Mon August 03 2015

Three Takeaways From This Week's Baha Mar Court Action

Hotel & Resort | Brian Major | August 03, 2015

Three Takeaways From This Week's Baha Mar Court Action

Photo via Baha Mar on Facebook

Friday’s Bahamas Supreme Court hearing to determine if control of the stalled $3.5 billion Baha Mar mega-resort project would go to a government liquidator ended anticlimactically as the proceedings were adjourned until August 19.

But the adjournment hasn’t halted negotiations outside of court among developer Baha Mar Ltd., construction firm China State Construction Engineering Corp. (CSCEC) and financer China Exim Bank to reach an agreement. Nor has it stopped the bitter verbal battles that have characterized the impasse.

In fact despite the official halt in the courtroom proceedings, Baha Mar observers uncovered three key takeaways from this past week’s court actions.

Alternatives to a deal remain unattractive: It appears none of this fray’s participants is satisfied with the prospect of a liquidator taking control of the Baha Mar project should the sides fail to reach an agreement.

Friday’s adjournment was reportedly prompted by CCA Bahamas, CSCEC’s local affiliate, whose officials contested the appointment of three Price Waterhouse Coopers (PWC) officials to serve as provisional Baha Mar liquidators.

The Bahamas Tribune reported CCA officials outlined their objections in a letter sent to the Bahamas attorney general late Thursday. Justice Ian Winder set a new hearing date of August 19 after government attorneys said CCA's position made it “inappropriate” to continue the proceedings. CCA officials declined to comment on the weekend’s court events Monday.

Meanwhile it’s clear Baha Mar officials aren’t buying into the winding up petition process. They blasted the government strategy in a statement late Friday, calling it “misguided and without merit,” and described the winding up process as “abusive, oppressive and undertaken in bad faith.”

Baha Mar attorneys also called the potential appointment of a provisional liquidator as “entirely unwarranted under the law,” and said the government’s court filings contained “numerous fatal flaws in procedural terms” that were “compounded by [the] announcement the persons they proposed to act as liquidators were…unsuitable."

“It should be clear that the government’s action do not serve the best interests of the Bahamas and its people,” they added. The winding up petition will “only undermine and delay” the parties’ ability to reach an agreement, they said.

Predictably, the Bahamas government defended the winding up process Friday. “From the beginning of this project the government has sought to facilitate an impartial process that results in the opening of Baha Mar under private ownership as soon as possible,” said Allyson Maynard Gibson, the country’s attorney general.

She called Baha Mar’s statement “misleading,” saying the government has encouraged “ongoing talks between all parties to seek an agreement out of court.” The government has also paid wages and salaries of Bahamian employees and “taken steps to assure that if the fate of the Baha Mar project [is] determined through court proceedings, those proceedings occur in the Bahamas, not in the United States.”

Gibson acknowledged that “a liquidator must be entirely free of conflicts of interest in order to be appointed.” She dismissed Baha Mar’s characterization of the cause of Friday’s adjournment.

“The government makes no apologies for ensuring that the third-party liquidator under consideration by the court is free of any real or perceived conflict of interest,” she said. “In the interest of ensuring a fair outcome for all parties, the government asked the Supreme Court to postpone [proceedings] until a new independent, third-party liquidator who is free of conflict can be nominated.”

The sides are still talking. Despite the charged language in their statements, Baha Mar and government officials both said negotiations are continuing.

Baha Mar officials said the sides are “making real, if slow progress.” Gibson seemed to agree with that description, saying, “A postponement of today’s hearing was advisable if only to encourage the agreement towards which the parties appear to be progressing.”

The stakes remain high. The project’s numerous constituencies – from vacationers with canceled and pending bookings to the mega-resort’s 2,500 employees, to hotel and tour operator partners and Bahamian contractor and service providers – are eager to see a positive outcome to a project that falls under the proverbial “be too big to fail” category.

In a statement Friday, the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) called for arbitration to end the court battle, expressing concern for “the fate of small and medium sized companies who were sub-contractors owed considerable sums for work on the Baha Mar project.” BCCEC officials called the businesses “the lifeblood and drivers of the Bahamian economy”.

The group also warned, “The international investor community is also watching this process very closely and investor sentiment will be dependent largely on how the government and Baha Mar in particular deal with this matter over the next few weeks.”

Also, while the Bahamas government has paid Baha Mar workers’ salaries as the impasse has continued, they did not pay the salaries of the resort’s non-Bahamian employees in the most recent cycle, drawing Baha Mar’s ire.

Magdalena Hamya, the developer’s vice president of human resources and organizational development, called the government’s decision not to pay the non-Bahamian employees “difficult to contemplate” and added, “This is a terrible message the government is now sending to our non-Bahamian citizens,” she wrote.

Meanwhile Robert Myers, a former BCCEC chairman, told the Bahamas Tribune he believes the resort’s delayed opening could reduce the country’s economic growth projections by 50 percent.

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