Nassau, Bahamas — China Construction America (CCA) claims that it has not been paid by the Baha Mar megaresort in The Bahamas since February, and one insider has asserted to the Nassau Guardian that, since the company hasn’t been paid the tens of millions it is owed, questions must be asked about where the money went.
The Baha Mar development was funded by a $2.45 billion loan from the Export-Import (Exim) Bank of China, plus a $150 million preferred equity commitment by CCA, a subsidiary of China State Construction Engineering Corporation (CSCEC), and a common equity investment by the developer, Sarkis Izmirlian, that some have pegged as low as $700 million, but which Baha Mar says was $850 million.
In its statement released just days ago, CCA noted that CCA Bahamas and its subcontractors have performed nearly $72 million of contract work since February for which the company alleges it has received no payment. Further, CCA asserts that its aggregate investment in and commitment to the project, including money advanced by CSCEC on behalf of the developer, approximates $220 million.
While rumours that the Chinese firms have demanded a forensic audit of Baha Mar have been dismissed by those who would know, at least one well-placed source who spoke on condition of anonymity posed the question.
“Where did the funding go? If CCA hasn’t been paid since February, where is the money? What are the soft costs that haven’t been disclosed?”
The financial status quo
According to court documents from the first day of pleadings by Baha Mar president Tom Dunlap, Baha Mar’s unaudited balance sheet as of the petition date – June 29, 2015 – reflected total assets of approximately $3.1 billion and total liabilities of approximately $2.7 billion. Baha Mar’s material debt obligations, Dunlap said, principally consist of approximately $2.4 billion in loans under a secured credit agreement with Exim Bank, approximately $140 million allegedly owed to CCA under the main construction contract, and approximately $123 million in trade debt.
“Under the prepetition credit agreement, the debtors have outstanding debt in the aggregate principal amount of $2,337,876,519 under a $2.45 billion term loan facility… The prepetition credit facility matures on January 31, 2026 – the 15th anniversary of the first utilization date, which was January 31, 2011,” Dunlap told the Delaware bankruptcy court, later adding that Exim Bank has refused to advance the remaining amount of approximately $112 million available under the prepetition credit facility absent certain unattainable conditions, including additional equity contributions.
What is not clear is why, given the millions still available under the prearranged credit, the developers still need $300 million to complete a project they say is 97 percent complete.
A coordinated campaign
CCA also appears to believe that there has been a coordinated campaign by Baha Mar, since the resort developer filed for bankruptcy on June 29, “to spin the news in favour of Baha Mar”.
Guardian Business was told it was clear Baha Mar was “pouring on the full-court press” on the media front.
The Baha Mar narrative has been from the beginning of the dispute that CCA has failed to deliver on schedule. In fact, on June 29 – the day the resort developer filed for bankruptcy in the United States – Baha Mar launched a fully realized, populated website containing information on its path forward. On that site, on that day, the developer said in a note to its staff – whom it calls Baha Mar citizens – that it filed for Chapter 11 “due to the financial consequences of the repeated delays by the general contractor, and the resulting loss of revenue”.
The best case scenario
“CCA wants to finish this project,” the source said, suggesting that the contractor initially came in when the project was teetering and “saved” it.
“CCA needs to get paid. The developer needs to come up with some financing,” the source said.
Even though CCA and Baha Mar both have claims against each other at the level of the Dispute Resolution Board (DRB), Guardian Business understands this does not tie the parties’ hands; they are free to pivot to other means to resolve their disputes.