by Richard Coulson

First published in The Tribune and posted here with the kind permission of the author.

Last Friday’s press reported a welcome bombshell— an  actual restructuring  plan for Baha Mar has been prepared .  This could mark a break-through in the present frozen status, since the plan protects all Bahamian claims.

The plan did not come from our Government  or the Chinese parties (Ex-Im  Bank and CCA construction company), all of  whom for the last two months have  shown how to be obstructive rather than creative. No, the plan was drafted by the executives and advisors of Baha Mar itself, as part of the Chapter 11  bankruptcy petition submitted to the US Federal District Court in Delaware. That highly experienced court has been continually  snubbed  by Prime Minister Christie  and Attorney General Maynard, both obsessed with “sovereignty”and  fully backed by the Chinese,  who have been calling the shots for our Government in a near collusive arrangement..

The plan is far from complete and many significant terms remain to be fleshed out.  As in any Chapter 11 reorganization, not every creditor can expect to get 100 cents on the dollar,  so forceful  objections  and alternatives will be filed  before any approval  by Delaware Judge Carey,  who asked  the parties  to continue negotiating and possibly accepting a mediator under Court supervision. But one principal provision is clear: the plan provides for first priority of full payment  of moneys owed to  Government and to all private Bahamian creditors, as well as to employees, with  the losers to  be the Chinese.

The Ex-Im  Bank will have to accept a deferral or partial haircut  on its $2.45 billion loan,  and any claims by CCA will be sharply limited, with the $150 million preference share  investment by CCA’s parent  company  simply being written off as worthless. Naturally, the Chinese legal team is already vigorously disputing this plan, demanding that Judge Carey reject it. They are entitled to battle, but they are big boys who can fight their own corner. Now that our Government  and Bahamian creditors  are  to be made whole, there is no need  for our political leaders to continue to coddle the Chinese. Many citizens here are well aware, although never officially acknowledged, that it was shoddy workmanship by CCA that led to stoppages and the delayed opening—and of course it was the Chinese Bank who initially insisted that CCA get the job as prime contractor, importing  several thousand unskilled  monoglot  Oriental laborers to live in barrack-style compounds.

The restructuring plan provides  no easy gift to the Izmirlian family with their equity investment somewhere in the range of $800 million. They too must take a haircut. The plan indicates that this equity  will vanish, to be replaced by  fresh capital  that must be shared with a new investor(s) in a deal that will surely require a substantial dilution of the Izmirlians’ present 100% stake in the project.

So where stands Government’s petition for Bahamian liquidation and winding up of Baha Mar, to be decided on September 4  by our Supreme  Court Judge Winder?  If logic and common sense prevail,  our Attorney General should  follow the sensible recent recommendation  of Minister of Tourism Wilchcombe  and simply withdraw the petition. With all Bahamian interests  protected  under the Chapter 11 re-structuring plan, any local liquidation procedures are unnecessary and would simply create duplication and confusion. The press reports show that the plan is evidenced by complex and detailed documents drafted by experienced American lawyers over many weeks. By contrast, Government fumbling has not even appointed local liquidators to handle the task.  Accountants first from PwC and then from E&Y had to be dropped, and now  names are being  floated of three individuals two of whom are foreign consultants without even an office in Nassau. As a practical matter, any of these potential liquidators will require months  to familiarize themselves and to prepare a plan equivalent to what is already drafted for Chapter 11. With the withdrawal of the Government petition,  our courts would be free to give full comity to the Delaware court and enforce its decisions in accordance with Bahamian law. “Sovereignty” will disappear as an issue, and ultimate opening of Baha Mar achieved  much sooner with international cooperation between court systems.

We wonder if our Government will continue its present love affair with China, as the breast to suck for much of  our wealth?  That country’s recent implosion  has reverberated around  the world. Not only in stock-markets, when it became clear that Chinese securities were wildly overvalued and that the authorities were unable  to halt the free-fall of prices; real economies also suffered —Brazil  and  Australia,  who profited by selling iron ore and coal to China,  soon  found these commodities were no longer needed  as the Far Eastern colossus realized it had already rashly over-built and turned off the order spigot.

This obvious mismanagement  of the Chinese economy  should make the Bahamas Government  more cautious in its future dealings. In the current Baha Mar debacle, every Government decision has favored the Chinese Ex-Im  Bank and the contractor CCA,  at the expense of the owners of the hotel project. We do hope that the new wholly-owned  Chinese  mixed-use development  The Pointe will proceed  smoothly, as it is in a key downtown location near the British Colonial. We trust that a 100% performance bond has been posted against the possibility  that funding for  the $250 million cost will abruptly be diverted back to Beijing to cover shortfalls in the home economy.  We understand that Chinese leaders are already pulling back from the network of investment promises made  across Africa and South America, as “surplus” capital is no longer found to be surplus.

We  note for the umpteenth time that while the building permits for The Pointe were granted in record time, development proposals by local property owners along the decaying eastern Bay Street zone have been consistently ignored by  the PLP Government, although fully planned and funded. Clearly, the local owners come from the wrong political party, a sin that has stifled many worthy plans.

Chinese energy and capital still have much to contribute to the Bahamian economy , but must be more closely regulated and kept in balance with the  interests of other investors, both foreign snd domestic. Only with this balance can the present Baha Mar calamity soon be resolved and similar disasters be avoided in the future.  END

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Mr. Coulson has had a long career in law, investment banking and private banking in New York, London, and Nassau, and now serves as director of several financial concerns and as a corporate financial consultant. He has recently released his autobiography, A Corkscrew Life: Adventures of a Travelling Financier.