The largest resort in the Caribbean, the .5 billion Baha Mar remains unopened near Nassau, the Bahamas.
The failure of the monster resort to open due to bankruptcy has put such a strain on the local economy that it has threatened to harm the Bahamas’ credit rating. Not surprising, considering claims that the resort could by itself generate 12 percent of the country’s GDP.
The story involves not only the island nation, but also the United States and China, where the government controls that bank and the construction firm that will decide if the resort is ever finished.
According to former Baha Mar Ltd. Director Dionisio D’Aguilar, quoted by Bloomberg, “Their attitude is, ‘We’re the big boys in the room, we’ve got the money—so you do what we say.”
The resort’s history goes back to 2005 when the country reached a deal with a local businessman to upgrade Cable Beach, one of the most popular beaches on the islands.
The businessman, Sarkis Izmirlian, spent $900 million on the resort and brought in as his partner Caesars Resorts. The 2008 Great Recession ended those dreams. China State Construction Engineering Corp., one of the largest contractors in the world, saw this as an opportunity. It sent him to Export-Import Bank of China, or Exim, which provided $2.4 billion in construction loans.
There was a proviso: that the contractor could never be fired and that Chinese workers would have to build the resort. Reportedly, the contractor made many mistakes and the construction took much longer than anticipated.
Beginning last spring Izmirlian hired more than 2,000 hotel works with assurances from China that the construction would be finished. He was now in the position of paying $4 million a month to staff a hotel with no guests.
Izmirlian moved first to declare bankruptcy last June, choosing to file in an American court.
This caused China State Construction to accuse Izmirlian of being the problem. It declared in court, “Baha Mar Ltd.’s decision to file for bankruptcy is the direct result of its failure to secure adequate financing and its mismanagement.”
In September a Delaware judge ruled that the case had no business being in a U.S. court. A Bahamian judge installed liquidators.
Meanwhile Izmirlian has continued to parlay with Exim. So far nothing has changed. Exim says it has several investors interested in stepping in to finish the resort. This includes the Fosun Group. Under the most optimistic scenario the resort wouldn’t be able to contribute to the Bahamian economy until at least 2018.
