By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar will reduce its workforce to just 50 key employees essential to run a ‘skeleton operation’ if it is unable to resolve the dispute with its Chinese partners by next Monday.

Court documents filed by the $3.5 billion developer reveal the full extent of the radical downsizing strategy it will adopt if it is unable to reach an agreement with its debt financier, the China Export-Import Bank, “in the near term”.

Branded the ‘Preserve and Maintain Alternative’, the plan implies that more than 2,500 Baha Mar staff could lose their jobs within the next two months if the developer, its Chinese partners and the Government are unable to reach a settlement in their ongoing talks in Beijing.

While Melia Nassau Beach Resort staff are unlikely to be affected, as it is the only operating property generating cash flow, the employee numbers affected amount to between 1-2 per cent of the total Bahamian workforce.

Thomas Dunlap, Baha Mar’s president, in a July 10, 2015, affidavit, said the developer would require just 52 ‘Group A’ employees “to manage the wind down and operate the remaining businesses” until the mega resort could be completed and opened.

A further 47 staff (Group B employees) will be required to assist with the wind-down of Baha Mar’s operations over that 45-60 day period, although Mr Dunlap reveals they will ultimately be terminated.

The Baha Mar president says both the Group A and Group B employees are equivalent to 6.5 per cent of the developer’s total staff, meaning that ultimately some 93.5 per cent of its workforce may be made redundant. Those percentages, though, do not match the employee numbers contained in earlier court filings.

The details are revealed in filings seeking the Delaware Bankruptcy Court’s approval for Baha Mar to pay these 99 workers what could ultimately total nearly $5 million in bonuses for performing these key tasks.

The hearing on whether to approve these will take place next Monday, July 20, which is the same date previously set by the Delaware court to determine whether Baha Mar should be allowed to pay $1.861 million in severance monies.

Baha Mar’s filings confirm that the Cable Beach developer is pursuing a twin track process to resolving its dispute, involving the negotiating table (currently in Beijing) and, if necessary, the courts in the Bahamas and Delaware.

They also indicate that Baha Mar and its principals, the Izmirlian family, will seek out new investors and financing sources if they are unable to reach a satisfactory agreement with the Chinese bank and its contractor, China Construction America.

Other filings suggest Baha Mar is more than ready to ditch the Chinese contractor, and the latest documents, including Mr Dunlap’s affidavit, indicate the developer is also prepared to look beyond the China Export-Import Bank for funding.

Whether the bank, whose $2.45 billion in debt financing is secured on the property and real estate assets at Cable Beach, will allow Baha Mar to do that without a fight is unlikely.

Confirming that Baha Mar will be forced to “make immediate and difficult decisions” on its workforce if no resolution was forthcoming, Mr Dunlap set out the three-part ‘Preserve and Maintain Alternative’ to completing the $3.5 billion project.

“If an agreement with China Export-Import Bank is not reached in the near term, the debtors [Baha Mar] will be compelled immediately to downsize their operations to a minimum over approximately 45-60 days, which includes archiving a substantial portion of their current property and reducing their workforce to a skeletal staff necessary to minimally maintain the resort assets until such time as construction completed and the property opened,” Mr Dunlap alleged.

“I believe that this downsizing is necessary to curtail the substantial cash drain the debtors are currently enduring in light of their pre-petition efforts to ‘ramp up’ and prepare for the previously anticipated opening of the resort in the Spring.”

Mr Dunlap said that should such a scenario occur, Baha Mar would have to identify “a new source of financing”. Whether the China Export-Import Bank will allow it to do so, and not appoint a receiver or take over Baha Mar itself, is another matter given that the Supreme Court has yet to protect the assets by recognising the Chapter 11 bankruptcy proceedings in the Bahamas.

Once the ‘new financing’ is identified, Mr Dunlap said “the final stage of construction” would start, with the project opening and many employees re-hired.

He justified the proposed bonus initiative, billed as the ‘Key Employee Incentive Programme’, by saying the performance of the 99 chosen workers would “be absolutely critical in realising [Baha Mar’s] long-term restructuring objectives”.

Mr Dunlap referred to the “complexity and logistical components” involved in winding down the new resort properties, and the workload facing “a significantly reduced staff”.

“Specifically, the debtors need to incentivise approximately 47 indispensable employees to assist with the wind-down of their respective operations over a 45 to 60-day period, notwithstanding their impending termination,” the Baha Mar president said.

“And incentivise approximately 52 additional employees to manage the wind-down and operate the remaining businesses until construction of the resort is resumed and pre-opening recommenced.”

Previously filed court documents show Baha Mar has a total workforce of 2,593, excluding the Melia employees, so the ultimate workforce reduction foreshadowed by Mr Dunlap would eliminate 2,541 posts.

The Baha Mar president said the 47 employees who will be terminated, once their wind-down tasks are completed, would have to secure and archive casino assets; store all computers and electronics; secure the retail inventory; and secure, inventory and store the contents of 90 containers containing furniture, fixtures and operating equipment.

Describing how the employee incentive initiative will work, Mr Dunlap said the 47 staff in Group B would “receive the greater of” 60 or 90 days of their basic salary rate, or 1.5 times’ their daily remuneration for the period between June 29 and the date when they complete their tasks.

As for the 52 ‘Group A’ staff, Mr Dunlap said expatriates would gain a bonus equivalent to 60 per cent of their annual base salary, and Bahamians a sum equivalent to 30 per cent.

This would be paid in increments of 20 per cent and 10 per cent, respectively, once the three milestones - “archiving” of the property; construction re-start; and opening were achieved.

Mr Dunlap said the incentives would ensure that Baha Mar’s assets were preserved, and a re-opening could “happen as efficiently, and with as few disruptions and delays, as possible”.

“In my estimation, failure to implement the Baha Mar Incentive Programme will jeopardise the debtors’ prospects of an expedient and successful reorganisation, and create additional costs in hiring and training new employees,” Mr Dunlap said.

“I believe that unless the Baha Mar Incentive Programme is approved, the debtors will be unable to successfully and efficiently archive and re-open their operations in the event they are forced to pursue the Preserve and Maintain Alternative.”