China Export-Import Bank in no hurry to sell
A former board member of the stalled $3.5 billion Baha Mar resort project on Nassau’s cable beach told Nassau Guardian Business last week that Bahamas Prime Minister Perry Christie’s efforts to quickly find a buyer for the resort will probably fail, because the Chinese Export-Import Bank (Exim), owned by the government of the People’s Republic of China, is in no hurry to sell the project for a bargain-basement price.
Exim provided a $2.5 billion loan for the project—the largest resort project ever in the Bahamas—to Baha Mar Ltd., owned by Greek developer and local resident Sarkis Izmirlian. Izmirlian’s family contributed $900 million of its own to the construction costs.
Last year, disputes over the Chinese state-owned contractor missing construction deadlines and what Izmirlian claimed was poor-quality work led to Baha Mar withholding payment to the contractor, which abruptly stopped work on the project. It has sat idle since, by most accounts more than 90 percent complete.
In November, after efforts by the Bahamian government to negotiate an agreement to end the dispute between Izmirlian and contractor had failed, Izmirlian was pushed out as Exim placed the property in receivership. Izmirlian, his $900 million investment essentially lost, is pursuing a lawsuit in the U.K. Christie, meanwhile, has been racing to restart a project on which Bahamian tourism is depending, with projections showing the six-hotel megaresort will produce more than 12 percent of the island nation’s gross national product.
Last week, Christie reported that a “huge number” of investors are interested in buying Baha Mar. Speaking at the swearing-in ceremony of Paul Andrew Gomez as the new Bahamas ambassador to the People’s Republic of China, Christie said, “There are a huge number of very internationally recognizable corporate names interested in the product, who have made applications for the product; those will be brought to your attention because it is for the bank to make a decision, including both hotel casino firms, and Bahamian interests that are here and including Chinese interest in the huge multibillion-dollar project.
“It makes no sense to allow that asset to continue to be exposed to the elements and be subject to deterioration because what starts off as a $300 million exercise will end up costing $600 million or $700 million and counting.”
Christie said the suitors include “big American companies.”
Christie also said he is working with Exim to pay the Bahamian subcontractors that worked on the project, and that he is “not prepared to accept that those contractors will be paid less than a dollar for a dollar for the work performed. So, I’m anticipating that very early in 2016 we’re going to have a major move for Baha Mar.”
However, one insider in the case says the prime minister can no longer control the timing of the project. “It’s over,” former Baha Mar Ltd. board member Dionisio D’Aguilar told Guardian Business. “It’s over until the Chinese government, through China Export-Import Bank, decides to whom they are going to sell that project, because clearly, they don’t want to run it. So, until they decide to give it away at a fire-sale price, it will just sit there.
“And I make the point that the Chinese are in absolutely no rush to make this decision. Perry Christie and his cabinet are anxious for them to make a decision, but they are in no rush. So you will see that project linger and linger and linger and linger until someone in China decides to make a decision, and you know someone is scared to make a decision because a head will roll.”
D’Aguilar said part of the reason is that Exim will attempt to recoup its entire $2.5 billion investment, and that he is certain no one is going to pay that much for the project. “Of course not,” he said. “You’re a shark, you know they are desperate; the rules of capital say try to get the best price. So they are desperate to sell—they should be desperate to sell, because it’s costing them however many millions a month to hold that place—and the person who’s interested in buying it says, ‘You know what? Time is on my side.’”
D’Aguilar added that the Bahamian government has not yet put the project into full liquidation, only “provisional liquidation,” meaning some in the government realize it was a mistake to reject Izmirlian’s effort to place the project in Chapter 11 bankruptcy in the U.S., which would have allowed for reorganization and the injection of new capital.
“It’s in provisional liquidation, which means it hasn’t gone to the final stage yet,” D’Aguilar told the newspaper. “Why? Because they all know what the consequences are. If you go into liquidation, the asset is to be sold to the highest bidder, or sold to the person to which the largest creditor wants to sell, and there is no option for a reorganization, there is no option for renegotiation, it’s just over, it’s done, it’s finished. The creditors own it and they just want to flog it.
“And that is not in the best interests of the country. This decision that they made is just not in the best interest of the country. As we see! There’s no end in sight. It just sits there in the room like a big white elephant.”
Christie was criticized last week by Dr. Hubert Minnis, leader of the Bahamas’ opposition Free National Movement political party, for what he said was selling “false hope” over the potential revival of the Baha Mar project.
“(Christie) is a proven talk-first, think-later leader,” Minnis said, according to the Bahamas Tribune. “As a result of the government’s missteps, Baha Mar has become a national burden and an international embarrassment for our country. Former Baha Mar board members have repeatedly presented the facts that connect Christie and his government’s poor decision-making which created this daunting delay saga.
“At a time when so many Bahamians are hurting, we have a prime minister shuffling in dreamland, detached from the glaring realities. We need change.”
