By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Baha Mar director has expressed fears that yesterday’s Supreme Court ruling will further “embolden” its Chinese partners to harden their negotiating stance in talks to resolve the dispute over the $3.5 billion project.

Dionisio D’Aguilar described as “inevitable” Justice Ian Winder’s refusal to recognise Baha Mar’s Chapter 11 proceedings in the Bahamas, adding that the verdict - combined with the Government’s position - now placed the developer at “a serious disadvantage”.

He argued that, secure in the knowledge it had the Government’s backing, and now bolstered by the Supreme Court ruling, China Construction America would be encouraged to take a much harder line in the ongoing negotiations with Baha Mar.

Mr D’Aguilar complained that “everything is being stacked against Baha Mar”, with the Government and its Chinese partners seemingly “working in tandem” to a “well mapped-out” strategy to remove the Izmirlian family from the project.

He was speaking after Justice Winder also refused to extend a stay arising from the Delaware Chapter 11 proceedings that would have prevented Baha Mar’s creditors from acting against it to recover their debts.

And, in a comprehensive victory for Baha Mar’s Chinese partners and the Government, Justice Winder also dismissed a Baha Mar application that would have allowed it to use to the $80 million ‘working capital’ facility lined up by its principal, Sarkis Izmirlian.

“I guess the decision was inevitable,” Mr D’Aguilar told Tribune Business. “It just seems that everything is being stacked against Baha Mar.

“The Government is leading the charge to wrest this out of the Chapter 11 proceedings. It’s not the creditors. It seems as if the Government is acting as an agent for the creditors.

“The relationship between the Chinese and the Government is increasingly close, and it appears that they’re working in tandem. That does not bode well for foreign direct investment (FDI) in this country,” he added.

“There’s too much shenanigans going on in the background. It seems as if the whole process has been well mapped out and choreographed as to how to turf Baha Mar out, despite what they say.

“The provisional liquidator’s appointed: That script is already written, too.”

Mr D’Aguilar cited the July 17 letter written by the Attorney General to the top executives at China Construction America’s Beijing-based parent as evidence of the increasingly close relationship between the Christie administration and Baha Mar’s partners.

In her letter, Allyson Maynard-Gibson expressed the Government’s “profound gratitude” to China State Construction Engineering’s top executives for their “essential contributions” to the July 12-15 negotiations that attempted to break the Baha Mar deadlock.

As Tribune Business predicted, many persons, including Mr D’Aguilar, have interpreted that letter and its warm language as proof that the Government is working with the China Export-Import Bank and the contractor against Baha Mar’s interests.

“I didn’t realise for one minute that the Government’s relationship was so cosy. It’s quite shocking,” Mr D’Aguilar told Tribune Business.

“It seems as if the Government has tipped its hand and put Baha Mar at a serious disadvantage at the negotiating table. I don’t know how closer this activity gets us to a deal. It is what it is.”

Referring to Mr Izmirlian, Mr D’Aguilar added: “It’s just a pity for someone who’s put 13 years of his life into this that it should end up where it is right now.

“It is his brain child, his idea, and it’s a pity that it’s ended up where a provisional liquidator may take control.

“A concerted effort has been made to wrest this from his control, and give it to agents of a foreign government.”

Had Justice Winder ruled in Baha Mar’s favour yesterday, it would have handed the developer and Mr Izmirlian a significant advantage in their negotiations with China Construction America.

For a recognition of the Chapter 11 proceedings, giving them legal effect in the Bahamas, would have ring fenced Baha Mar and its resort/real estate-based assets from all creditors, especially the Government and China Export-Import Bank, forcing them to come to the table on Mr Izmirlian’s terms.

Still, for the short-term (one week) the Supreme Court verdict will likely mean little change to the status quo, apart from potentially boosting the negotiating stance and positions taken by both the Chinese bank and contractor, plus the Government.

With the Delaware Chapter 11 proceedings still active, none of the parties to yesterday’s Supreme Court hearing will likely risk moving against Baha Mar.

Not even China Export-Import Bank, which is the $2.45 billion secured creditor, will act on the default terms in the loan contract given that the Delaware court’s orders grant protection and relief against such activities.

With the bank, China Construction America and even Cable Bahamas all owning US-based assets or business concerns, none will want to violate a Delaware Court Order and expose themselves to ‘contempt of court’ related sanctions.

As reported previously by Tribune Business, the China Export-Import Bank will likely be waiting for the Government’s Baha Mar winding-up petition to succeed, and the appointment of provisional liquidators for the 14 locally domiciled Baha Mar companies.

Once that happens, the provisional liquidators will likely move to withdraw the Chapter 11 action, paving the way for the bank to realise upon its secured loan.

And the several thousand smaller, unsecured creditors are unlikely to move against Baha Mar by filing their own winding-up petition, since doing so would still leave them with nothing. In a winding-up, all the proceeds will go to the Government and the China Export-Import Bank.

One accounting source, speaking on condition of anonymity, said of Justice Winder’s ruling: “It doesn’t mean much. It doesn’t bother anyone. It doesn’t disturb the apple cart.”

In short, Baha Mar and its assets will likely be safe for the moment - at least until the Government’s winding-up petition is heard on July 31.

However, Justice Winder’s pledge to deliver the written reasons for yesterday’s verdict within two weeks means that they will not be published until after the winding-up petition is heard.

And, because it will need to view the written verdict first, Baha Mar will not be in a position to appeal the Chapter 11 ruling until after the winding-up petition is heard.

Furthermore, with Baha Mar still unable to use the $80 million ‘debtor-in-possession’ financing arranged by Mr Izmirlian, it remains unclear whether the Government will continue to pay the salaries for 2,400 Baha Mar staff. Or if Baha Mar will soon implement plans for mass lay-offs that will reduce the workforce to a ‘skeleton’ 50 persons.

The Christie administration subsequently indicated the petition’s filing was “a precautionary measure”, designed as a ‘fall back’ in case talks between Baha Mar and its Chinese partners fail to produce an agreement.

The Government’s stance has been that Baha Mar could string out the Chapter 11 process “indefinitely” if it so wanted, while it sought out a new contractor and financing.

This, it has warned in legal filings, is unacceptable given its desire to complete and open Baha Mar in the shortest possible timeframe, and boost the economy and employment.

The Government’s interests are thus aligned with China’s, which are geared towards ensuring China Construction America remains as the contractor, and keeping all non-Chinese financing sources away.

Baha Mar is currently negotiating with the contractor, the party with whom it has the most bitter, deepest divisions. If these two can work out a deal, it will then be on to negotiate with the China Export-Import Bank and, finally, the Government.