Nassau, Bahamas — Talks involving bankrupt Bahamas megaresort Baha Mar, China State Construction Engineering Corporation (CSCEC), the Export-Import (EXIM) Bank of China and the government ended in Beijing on Tuesday without the parties reaching an agreement.
A government statement said the remaining “major point of difference between the parties is Baha Mar’s refusal to provide its part of a guarantee required by EXIM to secure a commitment of additional lending to enable completion of the project”.
In fact, according to the statement, Baha Mar CEO Sarkis Izmirlian is proposing that the government of The Bahamas provide EXIM with a sovereign guarantee of up to $175 million in place of any guarantee by the contractor.
Though the government said the parties did make “considerable progress on the commercial terms” of an agreement between Baha Mar and China Construction America (CCA), the deal is moot unless Baha Mar provides the guarantee.
The new financing proposal for Baha Mar would include $200 million in new lending by EXIM over and above the amount still available under its existing credit facility.
“EXIM has insisted that its new $200 million credit extension be guaranteed by the contractor (CCA) and/or the developer (Baha Mar),” the statement said.
“The developer has proposed to provide a standby letter of credit to back $25 million of the new $200 million credit extension.
“The contractor has offered to guarantee the remaining $175 million on the condition that it receives a corresponding guarantee by the developer.
“In the most recent discussions the contractor has agreed that the amount of the guarantee could be limited to $100 million.
“The developer has declined to provide any guarantee, apart from the $25 million letter of credit and has proposed as an alternative that the government provide EXIM with a sovereign guarantee of up to $175 million in place of any guarantee by the contractor.”
The government statement also indicated that during the four-party talks, the parties arrived at several proposed compromises. However, it did not provide any specifics.
“While urging the parties to arrive at an agreement during the talks, EXIM pointed out that the contract documents between the parties stipulates that cost overruns should be borne by the developer and that the contractor should finish the project,” the statement said.
“The contract documents were drafted in this manner so that the project would be completed and the parties would then be free to pursue remedies against each other in the courts.
“As EXIM indicated, Baha Mar has decided not to complete the project in accordance with the contract documents.”
Reportedly, an extra $400 million is needed to complete the project at Cable Beach.
In a letter dated July 23, Izmirlian entreated EXIM to match the resort developer’s pledged $200 million to prevent CCA from further holding Baha Mar “hostage”.
Izmirlian said his aim is to deploy a share of that financing to hire Bahamian contractors to step up and complete CCA’s work on the resort, though Baha Mar remained in negotiations for Chinese general contractors “to assist if needed”.
However, as EXIM pointed out, CCA has a binding contract in place with Baha Mar.
Baha Mar has repeatedly blamed CCA for its delays.
Attorney General Allyson Maynard-Gibson led the Bahamian delegation to China for a second round of talks this week.
After three days of negotiations, the delegation left Beijing on Tuesday. Izmirlian did not attend the meetings. Baha Mar president Tom Dunlap and other Baha Mar representatives negotiated on the developer’s behalf. The developer and Baha Mar’s contractor have agreed to continue meeting in a bid to hammer out an agreement.
“It was understood, however, that in the meantime the parties might continue to pursue other legal options,” the statement said.
Without any source of funding, Baha Mar would now have to face the winding up petition that the government filed in the Supreme Court. Justice Ian Winder will hear the petition on Friday.
Baha Mar, which is hoping to avoid liquidation, previously categorized the move as “an attempted nationalization of a private investor’s assets”.
The government has dismissed this claim as an untruth.
The government is seeking the appointment of a provisional liquidator to manage Baha Mar’s affairs with a view to getting the project completed and operational. Baha Mar filed for bankruptcy protection in the United States on June 29.
The company said the resort is 98 percent complete.