China and the World

Last resort

Chinese keen to keep Bahamas hotel afloat

Bahamas w

Surprisingly troubled waters...

From his base on Nassau in the Bahamas, the pirate Blackbeard struck terror across much of the Caribbean during the early eighteenth century. As his ship, the Queen Anne’s Revenge, pursued its prey, Blackbeard would set fire to hemp woven into his long straggly hair and beard to frighten his intended victims into submission.

“Damnation seize my soul if I give you quarter or take any from you,” was his famous battle cry.

The same attitude appears to have been adopted by two companies battling over the fate of a delayed $3.5 billion integrated resort on the famous Cable Beach, close to the archipelago’s capital.

The stakes are high, not only for the two companies involved (one Chinese, one local), but also for the Bahamas as a whole. If and when it opens, the resort will employ 1.5% of the island chain’s population and account for 12% of its GDP. Covering 1,000 acres, it houses a cluster of luxury hotels, an 18-hole Jack Nicklaus golf course, a casino and a nightclub designed by the singer Lenny Kravitz.

Local newspapers say the Baha Mar resort is a project which is simply too big to fail. For the Bahamas, it represents a major initiative to stay on the radar of nearby American holidaymakers before Cuba starts to poach visitors.

For China, the saga threatens to tarnish its reputation in a part of the world where it is trying to form closer ties. Two SOEs – Export Import Bank of China (Chexim) and China State Construction Engineering Corp (CSCE) first became involved in 2010 when they agreed to help a local businessman called Sarkis Izmirlian.

In what would become China’s largest overseas commercial real-estate project, Chexim agreed to provide $2.45 billion in loans, while CSCE committed $150 million in equity. According to China News Service Izmirlian invested $850 million via land and cash through his company Baha Mar.

The resort was scheduled to open in December 2014, only to be pushed back to March 2015, and then delayed again at the eleventh hour. A few months later, Baha Mar filed for Chapter 11 bankruptcy protection in Delaware.

“The Chapter 11 process is the best path to provide the time to put in place a viable capital structure and working relationship to complete the construction and successful opening of Baha Mar,” the company said. It said its hand had been forced by the contractor CSCE’s repeated delays and the resultant loss of revenues.

CSCE disagreed and the Bahamian government sided with it, declaring Baha Mar’s US bankruptcy petition invalid. The government placed the issue under the jurisdiction of its own courts, with Justice Winder currently debating whether to instigate a winding up petition and appoint a liquidator.

Baha Mar is contesting the process on the grounds that this amounts to a seizure of its property and assets. It has served legal notice that it wants its Chinese partner to hand over all communications with the Bahamian government on the grounds of potential collusion. It is also seeking $192 million in damages from CSCE for delays and “substandard” work.

CSCE counters that Baha Mar changed the chief architect shortly after the project began and provided poor designs. It says a similar integrated resort on nearby Paradise Island took 11 years to complete, whereas CSCE was expected to deliver its project in less than five. In court documents, the Chinese also allege that Baha Mar tried to halve the book value of CSCE’s equity.

The says CSCE has agreed to provide a further $100 million in equity and guarantee a new $175 million Chexim loan so work can restart. In return, Baha Mar needs to guarantee a further $175 million in Chexim loans.

But Baha Mar wants the government of the Bahamas to guarantee its portion, which it has so far refused to do. Contractors have told Reuters that even if work does begin soon, the resort will now miss the crucial Christmas season. To date, it remains 97% complete.

American TV producer, Scott Steindorff is one of those keen for a deal so he can begin filming his miniseries The Bahamas. He told Tribune 242 he is confident that, “when everything is resolved, the resort will be one of the greatest in the world”.

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