By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s joint provisional liquidators yesterday sought Supreme Court approval to borrow $25 million, warning they would have to shut the Melia Nassau Beach Resort if unable to meet an $8.7 million insurance payment falling due on Monday.

Ed Rahming, the KRyS Global (Bahamas) accountant and partner, alleged in an affidavit that the liquidators were seeking to borrow the insurance monies from Baha Mar’s financier, the China Export-Import Bank.

And they are seeking Supreme Court permission to obtain a further $16.262 million from as-yet undisclosed lenders to cover the remaining costs likely to be incurred during the two-month provisional liquidation.

Mr Rahming, in documents filed with the court yesterday, disclosed that the joint provisional liquidators had located $10.342 million in cash assets upon taking control of the seven Baha Mar companies on September 4.

Apart from a total $842,000 that remained in the companies’ combined bank accounts, Mr Rahming said the only other source of liquid cash available to them was the remaining $9.5 million balance of the ‘roads’ money owed to Baha Mar by the Government.

That has now been transferred by the Government to bank accounts controlled by the joint provisional liquidation team, which also features Nick Cropper and Alastair Beveridge, of UK-based Alix Partners.

Still, Mr Rahming warned that “the limited cash” available to the trio meant it would be impossible to keep the Melia open, maintain insurance coverage over the whole $3.5 billion project, and for the provisional liquidation team to carry out their Supreme Court-appointed mandate.

“Since our appointment as joint provisional liquidators, we have examined and reviewed the financial affairs of the seven provisional liquidation entities and discovered that the total sum of $8.738 million is required by Monday, September 28, in order to maintain insurance coverage over assets related to the Baha Mar project, including the ongoing trading operations at the Melia Nassau Beach Hotel,” Mr Rahming alleged.

“If the insurance policies were to lapse on the 28 September, 2015, due to non-payment, the joint provisional liquidators would be faced with having to immediately cease operations at the Melia, which would have a materially detrimental impact on both the operations and the value of the Melia hotel.”

Of the $8.738 million sum, some $8.726 million is due to AON, while the remaining $11,707 is to be paid to BISX-listed broker, J S Johnson.

“At this time we have limited cash available to us and, in the absence of immediate emergency funding it would be impossible for us to maintain insurance coverage over the project, maintain the commercial operations at the Melia hotel, and to carry out our functions under the provisional liquidation,” Mr Rahming warned the Supreme Court.

He added that Baha Mar’s $2.33 billion financier, the China Export-Import Bank, was “in the process of obtaining the necessary internal approvals to advance” the $8.738 million required to cover insurance payments due in three days’ time.

While there is little time to get the necessary funds to the joint provisional liquidators, the urgency and seriousness of the circumstances outlined by Mr Rahming’s affidavit makes it likely that the China Export-Import Bank will come through and payment made.

Any closure of the Melia would create a further major, unwanted headache for Baha Mar’s provisional liquidators, as it would send around 1,000 employees home.

The Melia is the only operating asset they have inherited, and the staff’s salaries and benefits are being covered from its daily operations and cash flow.

While several investment analysts, speaking on condition of anonymity, last night queried whether the joint provisional liquidators’ request would only further leverage Baha Mar’s balance sheet, some $112 million remains available and undrawn on China Export-Import Bank’s existing $2.45 billion credit facility.

It is also in the bank’s interests to ensure insurance coverage is maintained, given that its existing $2.33 billion is secured via a Bahamian-registered debenture over the very same resort assets requiring protection.

Meanwhile, Mr Rahming confirmed that the “balance of the roadwork funds” owed by the Government to Baha Mar for the West Bay Street re-routing and associated infrastructure works had been transferred to the joint provisional liquidators.

Some $9.5 million out of the original $21.7 million owed to Baha Mar was left, and it is likely most of these funds were used to make September salary and benefit payments to Baha Mar’s 2,400 staff.

“The roadwork sum and available cash of approximately $842,000 found in various bank accounts of the companies are the only cash that the liquidators have to pay employees, maintain existing operations, preserve the value of the assets of the companies and defray provisional liquidation costs,” Mr Rahming alleged.

“The joint provisional liquidators estimate that the costs of funding the insurance and other costs of maintaining and preserving the assets of the seven entities, the payroll costs and critical supplier costs, is significantly in excess of the cash currently in their possession.

“In order to defray the costs, excluding the insurance costs, to maintain and preserve the assets of the seven entities in provisional liquidation, the joint provisional liquidators require authority to borrow up to the sum of $16.262 million.

“By granting the joint provisional liquidators the authority to borrow this sum, we verily believe that we will be better able to comply with our mandate under the provisional liquidation orders to preserve the assets of the companies.”

The likely source of the $16.262 million was not disclosed in Mr Rahming’s affidavit, but given that Baha Mar is in provisional liquidation, the joint provisional liquidators will probably have to rely on the Chinese to carry them through to November 4 - the date when the Supreme Court will formally hear the winding-up petition.

Sources close to Baha Mar developer, Sarkis Izmirlian, last night said they were unaware of the liquidators’ $25 million loan approval request to the Supreme Court.

But, under the terms of their appointment, the joint provisional liquidators are supposed to notify the developer, via his attorneys at Glinton, Sweeting & O’Brien, whenever they have to seek the Supreme Court’s permission - as they are doing now.

A proposed Order, authorising Mr Rahming and his two colleagues to borrow the $9 million from the China Export-Import Bank, and the further $16 million, is now before Justice Bernard Turner.

The costs of the application are to be paid from the assets of the seven Baha Mar companies under the joint provisional liquidators’ supervision.

They are Baha Mar Ltd, Baha Mar Land Holdings Ltd, Cable Beach Resorts Ltd, Baha Mar Enterprises Ltd, BMP Three Ltd, Baha Mar Properties Ltd and BMP Golf Ltd.