by Richard Coulson
First published in The Tribune, Monday, September 5, 2016, and is posted here with the kind permission of the author.
In debating the pending Baha Mar payouts, let’s recognize one good thing amidst the surrounding sea of errors and deception: former Baha Mar employees (about 2,000 of them) will soon be paid what’s owed to them.
The complaint that It’s a “take it or leave it” deal is absurd. It can’t be anything else. Amounts owed for wages, severance pay, lack-of-notice pay, etc. were quantified into exact dollar amounts last October and are now recorded with the Creditors’ Committee, who have assured payment on a precise schedule before month-end. The $100 million allegedly promised by CEXIM Bank should be plenty to pay 100% of each claim, and I do not question the efficiency of James Smith’s team in doing just that. I doubt that as many as 1% of the employees will have any serious disputes to present to the Committee.
But, a huge but, these claims could have been paid a year ago if Government had accepted Sarkis Izmirlian’s offer of $80 million to cover Baha Mar’s operating expenses. Even better, these employees would have continued to be working at Baha Mar, with no need to make claims, if Government had accepted Chapter 11 and permitted Mr. Izmirlian to continue as “debtor in possession.” In effect, the Prime Minister, with legal advice of his Attorney General, chose to jeopardize the financial well-being of some 2,000 Bahamians simply to keep Izmirlian out of the picture.
At least, employees are now being paid. The fair treatment of “other creditors” remains in doubt. That title does not include Bahamian sub-contractors with a reported $58 million of claims against China Construction America (CCA), not against Baha Mar. In effect, Government’s deal with CEXIM has thrown them under the bus. According to Jerome Fitzgerald, expert on education, since CCA is (apparently) solvent , contractors should have no trouble collecting. Several claimants already know this to be a fatuous proposition, having experienced CCA’s evasive and obstructive slow-pay tactics. Expensive and time-consuming litigation may be their only solution.
Even payment to the accepted “other creditors” of Baha Mar is wrapped in uncertainty.
There has been no confirmation of the exact amount of CEXIM’s contribution and no estimate of the total potential claims, so nothing can be predicted for individual claimants, except that it is “likely” that any claim under $500,000 will get “most” of it paid. In fact, this preference for small claims is a violation of Bahamian law on liquidation. As I read the Companies (Winding Up Amendment) Act 2011, after the secured creditor CEXIM, the only priority is given to employees and government claims, with everyone else to be treated equally and ratably. Favoring small claimants would seem a “voidable preference”, leading to a tangle of claw-back litigation.
The situation now seems even more controversial for foreign creditors. Fast-talking Minister Fitzgerald has again put his foot in a legal quagmire with his quoted words: “The Committee is taking all claims, Bahamian and non-Bahamian. Some of those will not get much; they’re non-Bahamian”.
That may sound good for local politics, but that kind of favoritism can only be another violation of our liquidation law — as well as our long-standing policy of fairness to foreign investors and Constitutional anti-discrimination provisions. To hear these words from a senior Cabinet Minister (and clearly the PM’s fair- haired boy), can only be deeply unsettling to any foreign firm, even a Chinese one, considering doing business here.
If Mr. Fitzgerald’s rash words should be reflected in actual distributions preferring local creditors, I can envision a mass of high-octane litigation, against Government itself and the Credit Committee. It would be based not on Chapter 11 or US legislation, but on our own homegrown laws, and could throw a heavy monkey-wrench into the entire Baha Mar payments scheme, bringing it to a halt.
A local Q.C. barrister has pointed out to me that Baha Mar remains under the jurisdiction of the accountants whom Government itself appointed as provisional liquidators, while the so-called Credit Committee is a non-statutory body created solely by agreement (still undisclosed) between Government and CEXIM. If the Committee makes any payments infringing our liquidation statute, the liquidators could well hold the Committee members personally liable—a new tangle of legal knots for the Attorney-General to untangle.
And of course, the whole compensation scheme is nothing but a complicated sideshow, doing nothing whatever to advance the opening of Baha Mar, the key event for our economy. Until we see a signed contract with the name of the owner/operator who will take over from CEXIM, and until we see hard- hat workers again scurrying over the vast edifice (promised to start this very month), we are all floating in Perry Christie’s never-never land.
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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.
