Talks yield no resolution of problems
As the deadline for resolution of the problems for the Bahamas’ troubled Baha Mar resort approached, its owners, headed by developer Sarkis Izmirlian, laid off all 2,000 of its active and non-active employees.
The developer had no choice in the layoffs, after the Supreme Court of the Bahamas approved the request by the government-appointed court-appointed joint provisional liquidators (JPL) that the employees—including 1,440 non-active workers and 580 active employees, including management—be let go.
The employees included management and line staff with no resort to manage, and housekeeping staff with no rooms to clean. The Bahamian government initiated liquidation proceedings against Baha Mar Ltd. in July, in an effort to salvage the project, which represents the largest-ever resort development for the Bahamas.
The liquidation was set to officially begin with a hearing before the Bahamas Supreme Court today, November 2. However, last week, the court extended that deadline until November 25. Izmirlian has until then to complete negotiations with the project’s contractor and main financier to complete construction and avoid liquidation.
The project stalled after construction delays caused projected grand openings slated for last winter and spring to be cancelled. With the project—comprising six hotels, the largest casino in the Caribbean and a full range of amenities along the legendary Cable Beach—reportedly 90 percent finished, Izmirlian, frustrated by the delays, stopped paying the contractor, China Construction America (CCA). Izmirlian blamed CCA, the subsidiary of state-owned China State Construction Engineering Company, for low-quality work and for missing deadlines.
CCA halted construction and accused Baha Mar Ltd. of simply trying to avoid paying its bills. In June, Baha Mar filed for U.S. Chapter 11 bankruptcy protection, which the Bahamian government promptly refused to recognize, initiating the liquidation proceedings in an attempt to seize control of the project, complete construction and open the resort under a new manager.
Izmirlian, seeking to restart construction and maintain control of the project, claimed he lacked sufficient funds to pay the contractor its bills, but the project’s main financier, the Export-Import Bank of China, refused to give Baha Mar any more funding.
The government of Bahamian Prime Minister Perry Christie, meanwhile, gave the operator, contractor and financier a last chance to resolve all differences and restart construction. The three parties have been in talks for several weeks, mediated by the provisional liquidators, to try to avoid a government takeover.
For that to happen, an agreement must now be reached by November 25. And by late last week, the talks—despite initial positive reports—had not led to any resolution.
The Bahamian government has deemed completion and opening of the project crucial to its immediate future. In addition to thousands of jobs to address the region’s chronic unemployment, the Bahamas’ investment grade rating is likely to be lost if the resort project remains idle.
The government, in fact, is becoming fed up with Izmirlian, who had roundly criticized Bahamian officials for contributing to the project’s delays by failing to establish training for Bahamian citizens. Last week Wayne Munroe, an attorney for the Bahamian Gaming Board, told the Bahamas Tribune that Izmirlian should “put up or shut up” if he is serious about completing the project.
“(There was an appearance) before Justice Winder this morning, where there was an application to amend the petitions to add petitioners to all of the petitions except the Gaming Board’s petition, which was already amended, pursuant to his order,” Munroe said. “Leave was granted to amend, and leave was granted to extend the time for advertisements and a new hearing date was set for November 25… It’s in everyone’s interest that it happens as soon as possible. As I’ve said, if I were the government, I would tell you every month it doesn’t open, count on losing X amount of dollars of concessions. And it’s in everybody’s interest that it happens as soon as possible and I hope and pray anyway that everyone who claims to be earnestly working for it to be open as early as possible is actually being honest when they say that, because Bahamian people can only take so much.
“It’s about time that we stop being nice on this Baha Mar thing. We have a fellow walking around as the developer who tells people that he loves them. And we’re told he has a big pile of money and this is his ‘Baha Mar Nation,’ and he’s bringing none of it to finish it. And we’re entertaining him.
“If you’re broke, Bahamian people tell you carry your… if you’re not broke, stop joking and do what is necessary to complete the project. Every year, hundreds of Bahamians get put out of their homes because they can’t pay the bank back. Why would we think we would treat somebody differently because he happens to have some money and he happens to borrow $3 billion?”
Baha Mar CEO Izmirlian, in his message to employees announcing the layoffs, offered little in the way of what’s next for the project.
“Today I am writing to you with a heavy heart,” Izmirlian wrote. “Despite all of our efforts and hard work, the day we hoped would never arrive is here and the liquidation process has forced very significant workforce reductions at Baha Mar.
“The unfortunate truth is that with Baha Mar still not completed, no concrete resolution in place, no confirmed funding source and without the benefit of binding the parties into a proven reorganization process, there is simply no way for Baha Mar to sustain the thousands of jobs that are being cut.
“While there is still ongoing conversations with all parties aimed at finding a solution to be able to finish and open Baha Mar, it is very difficult to predict where these will lead us. As such, I am unable to tell you what the future holds for us. One thing I do know for certain, though, is that I am grateful for your commitment, hard work and unwavering dedication even in the face of adversity.”
If Baha Mar goes into full liquidation and construction is restarted under a new owner, Bahamian lawmakers have estimated that it could take six months to one year to complete the project. However, according to an attorney who spoke anonymously to the Tribune, the liquidation proceedings will likely take much longer. “It’ll take a year for them to blow their nose,” the source said.