A path toward opening the Bahamas’ stalled mega resort, Baha Mar, appeared to open yesterday after the Bahamian prime minister announced that the Chinese state bank controlling the scheme had agreed further financing with the contractor originally tasked with building it, China State Construction Engineering Corporation (CSCEC).
The deal, which is likely to fuel controversy in the Bahamas, paves the way for CSCEC’s subsidiary, China Construction America (CCA), to resume work on the $3.5bn beach-front hotel and casino complex, estimated to be 97% complete.
Work stopped early last year, with the scheme’s developer, Baha Mar Ltd, led by the wealthy Sarkis Izmirlian, filing for protection under the US bankruptcy code in June. The developer blamed its liquidity crisis on CCA for failing to meet agreed completion dates, while CCA accused the developer of mismanaging the project.
Reacting to the news, Izmirlian’s company yesterday hit out again at CCA, saying the company engaged in "deceitful business practices", and warning that Bahamians could be deprived of work and that unsecured Bahamian creditors may not be paid if the Chinese partnership retained control of Baha Mar.
Billed as the biggest leisure scheme in Caribbean history, the project broke ground in 2011 thanks to $2.4bn in financing from the state-owned Export Import Bank of China (Exim), with CSCEC appointed main contractor.
CSCEC subsequently delegated the contracting role to CCA. As well as transforming the Bahamian economy, the scheme was also described as a chance to cement the reputation of CSCEC, by turnover one of the top three contractors in the world, in the western hemisphere.
Yesterday Bahamian Prime Minister Perry Christie told the House of Assembly that the Exim Bank and CSCEC had entered into a "framework agreement" to complete Baha Mar "as expeditiously as possible".
"Following two days of successful meetings between representatives of the government of the Bahamas, the Export Import Bank of China and China State Construction Engineering Corporation, we are pleased to confirm that EXIM and CSCEC, the lender for Baha Mar and parent company of the resort’s general contractor respectively, have entered into a framework agreement which provides a pathway forward for the completion of the Baha Mar resort," Christie said, reading a joint statement by the bank and CSCEC, reports newspaper The Tribune.
"The arrangement provides for a framework for putting in place the financing required for completion of the project and for CSCEC’s indirect subsidiary, CCA Bahamas to remobilise and restart construction to finish the project as expeditiously as possible."
Today’s statement by [Exim] and CSCEC defies the sensibility of all Bahamians who toiled so hard in the belief that Baha Mar would be opened in a timely manner as a world-class destination– Sarkis Izmirlian’s company, BMD Holdings
Christie also said talks were underway between CCA and the resort’s court appointed receivers to agree terms and a timeline for the project’s completion.
It is unclear how this agreement affects the Exim bank’s attempts to sell Baha Mar to recover its money. According to local media nine purchase offers were submitted to Baha Mar receivers Deloitte & Touche by the 9 May deadline. Details of the offers have not been disclosed.
Izmirlian has repeatedly offered to take back Baha Mar while ensuring that the Exim bank and unsecured creditors get all they are owed, but he has refused to participate in the sale process, claiming that it is opaque and rigged against him.
As reported by GCR yesterday, Prime Minister Christie has come under public pressure to oppose an alleged deal that would see Baha Mar sold to CCA. While Christie’s announcement made no reference to a sale, the Exim-CSCEC agreement will be seen as a consolidation of the Chinese partnership’s control over Baha Mar.
While attempting to buy back into the scheme, Izmirlian and his allies have been waging a public relations campaign depicting the Bahamian government as acquiescent to self-serving Chinese entities, contrary to the interests of Bahamians. His company continued in that vein yesterday.
"Today’s statement by [Exim] and CSCEC defies the sensibility of all Bahamians who toiled so hard in the belief that Baha Mar would be opened in a timely manner as a world-class destination," said a press statement by Izmirlian’s company, BMD Holdings.
"It is very discouraging that China EXIM Bank, knowing full well the serious irregularities already demonstrated by its sister company China State Construction Engineering Corp, would now turn to this very same entity to complete the work which its subsidiary CCA has failed to do time and again on previous schedules that it has provided.
"Despite the now very public record, as well as facts revealed through the US Chapter 11 court process, the bank chose not to turn to highly-respected and proven Bahamian construction companies, that are perfectly capable of performing at the highest level.
"There is nothing in CCA’s past performance at Baha Mar that should lend confidence that they can complete Baha Mar on any schedule they provide and refrain from re-engaging in deceitful business practices, including overbilling and substituting inferior materials and systems to the detriment of the potential of this resort.
"This is of particular concern if CCA is to undertake the completion absent independent testing and supervision such as that provided by the original developer. The possible ramifications of all of this include fatal impairment to the unsecured creditors, the depriving of much needed work for Bahamian contractors, and increased risk with respect to whether or not the BM resort will indeed ever open."
Separately, last year Izmirlian’s company lodged a claim for damages worth $192m against CSCEC, as parent of CCA, in the English High Court in London over construction problems at Baha Mar. Now the responsibility of court-appointed receivers, the action has not progressed. This year Izmirlian and allies petitioned the Bahamas Supreme Court to recover the rights to the action.
Photograph: Aerial view of the Baha Mar resort after topping out in February 2013 (Source: Bahamar.com/PR Newswire)