By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A key Sarkis Izmirlian ally yesterday asserted “it doesn’t take a blind man” to see that Baha Mar’s contractor will likely lose its appeal against the growing $1.642bn damages awarded to the original developer.

Dionisio D’Aguilar, who sat on Baha Mar’s Board prior to Mr Izmirlian’s ouster from the mega resort project, nevertheless told Tribune Business that China Construction America’s (CCA) threatened liquidation of its Bahamian assets - namely the British Colonial and Margaritaville Beach Resort -  “won’t come into play at all” as a result of yesterday’s New York verdict.

The New York State Supreme Court’s appeals division, in a brief one-page decision, overturned the temporary injunction previously obtained by CCA and its affiliates that barred Baha Mar’s original developer from enforcing the earlier $1.642 damages award plus interest that he obtained against them.

The ruling leaves the Chinese state-owned contractor once again scrambling to raise, and post, the $1.9bn bond surety bond mandated by the New York court otherwise it will be unable to pursue its appeal against Mr Izmirlian’s initial comprehensive legal win.

CCA and its affiliates have previously disclosed in legal filings that they lack both the assets and means to raise this security. They warned that if Mr Izmirlian was not restrained from enforcing his award they may have to place their Bahamian corporate entities, including the downtown Nassau resorts, into liquidation proceedings before the Supreme Court.

Mr D’Aguilar, though, dismissed such an outcome as inconceivable as the Chinese government’s “reputation is on the line” if it permits one of its state-owned companies to fall into bankruptcy or liquidation. As a result, while CCA and its affiliates could threaten to liquidate the two Bahamian resorts, he dismissed it as “not a viable option” for resolving its long-running legal battle with Mr Izmirlian.

Instead, the former minister of tourism and aviation argued that CCA faces “one of two choices”.These, Mr D’Aguilar said, are pursuing an appeal, with all the uncertainty and extra legal costs that involves, or reaching a settlement with Mr Izmirlian. He described the latter as the “cheapest” option given that an unsuccessful CCA appeal could take the damages payout to near $2bn by the time a verdict is rendered.

CCA, though, gave no hint that it is backing down with yesterday’s defiant response signalling it has every intention of pursuing an appeal. “This ruling has no bearing on the merits of our case and will not deter us from seeking to have the trial court’s error-ridden decision overturned on appeal,” the Chinese state-owned contractor said in a statement responding to Tribune Business inquiries.

“As we intend to show, the lower court failed to apply well-established principles of New York law and disregarded clear evidence that BML Properties grossly mismanaged the Baha Mar project and then drove it into a wrongful, secret bankruptcy to eliminate its obligations to other stakeholders, including the Government and people of The Bahamas.” BML Properties is Mr Izmirlian’s corporate vehicle.

Asked about the consequences of yesterday’s verdict, Mr D’Aguilar told Tribune Business: “I go back to my original message. I think it would behoove CCA to attempt to settle. They have taken it to court and they have lost. All their motions at the original trial they lost, they lost the original trial, and they tried to stay the proceedings of the appeal and they’ve lost.

“Now they’ve got one of two choices. They can appeal or they can settle. Their record thus far has not been successful. They’ve lost in every instance. It doesn’t take a blind man to see where this is headed. They are most probably going to lose their appeal and, by that time, with 9 percent interest and the projected time to appeal being two years, that $1.642bn will have grown to $1.8-$1.9bn.”

Mr D’Aguilar said CCA and its affiliates are “clearly having trouble” raising the $1.9bn bond security needed to prosecute the New York appeal based on their own legal filings. “That’s why they asked the court to intervene and stop the appeal proceeding,” he added of the temporary injunction that was yesterday dismissed.

“It’s clear to see they are losing this,” Mr D’Aguilar reiterated. “They were wrong. They failed to live up to the terms of their contract and, in some instances, committed fraud. Now they have to pay someone who has been wronged. They have to settle or appeal. For me and everybody looking at it, it will be cheaper to settle.”

Asked about CCA’s warnings that, if unable to raise the bond, it may be forced to declare bankruptcy in the US as well as initiate liquidation proceedings before the Supreme Court, Mr D’Aguilar reiterated that this was an unlikely outcome and predicted there will be no impact for the British Colonial, Margaritaville Beach Resort and the hundreds of Bahamian jobs that depend on them.

“They can threaten to do that,” he told Tribune Business, “but the implications of that are far-reaching. This is a company, CCA, that is ultimately owned by the state of the People’s Republic of China. First of all, I’m sure this has never happened before where a state-owned company has contemplated declaring bankruptcy.

“The Bahamas would never contemplate that. We would fulfill the obligations of any company owned by the Government of The Bahamas. If they [CCA] were to do that, everyone would look at every state-owned Chinese company and say ‘wow, I don’t know if I want to do business with them because if they fail to live up to the terms of the contract they will declare bankruptcy.

“I just don’t think that’s an option,” Mr D’Aguilar reiterated. “I’m not even going to contemplate their bankruptcy. I don’t think it’s an issue for the local hotels here. I just think the lawyers can talk it, but I don’t think it’s a viable option once sensible heads gather in a room and discuss how they are going to deal with it.

“This is the country with the second largest economy in the world... I don’t see any other option for them other than to appeal or settle and, of the two, the cheapest is to settle. You have all these legal fees and have not succeeded thus far. The New York appeal court has allowed the appeal to proceed. You have got to pay to appeal, and put up the bond, or settle.”

Asked about the implications for the two downtown Nassau resorts, Mr D’Aguilar said: “None whatsoever. I don’t think they’ll come into play at all. They’ve really got nothing to do with this case in my opinion. The Chinese government’s reputation is on the line. Are they governed by the rule of law or not? Are they governed by the rule of law in the places they do business or are they not?

“If they want to engage themselves internationally these are the rules of engagement. They can settle now or they can appeal. It saves them face if they appeal.” Yesterday’s verdict, which allows both the appeal proceedings to proceed and Mr Izmirlian to move ahead with enforcing his damages award, means the next move is CCA’s.

Ryan Pinder KC, the attorney general, yesterday said the Davis administration was not worried by the New York appeals court’s ruling and its potential impact as the Government “has to be involved” in whatever developments take place.

“We’re not concerned. The Government has the mind of the Bahamian people first and foremost. Whatever happens, the Government has to be involved in the process and, ultimately, they have to come to government to effect any kind of Order or any kind of result that they achieve, and the Government - when they approach that - they will approach that with the mindset of Bahamians first,” Mr Pinder said.

He added that his office’s review of the original verdict that awarded Mr Izmirlian his $1.642bn, a sum that continues to increase with each passing day, has not uncovered anything for the Government to be concerned about.

“We have reviewed the ruling,” Mr Pinder said. “We don’t see any instances in the ruling that would really point to anything that the Government should be concerned about, and that was the first ruling, so we’ll review the court of appeal ruling that just came down and see if that has any implications.”

CCA had previously asserted it was “willing to pledge” its two Nassau resorts, which have a combined value of up to $355m, as security for its appeal against Mr Izmirlian’s original verdict.

Genguo Ju, CCA (Bahamas) executive vice-president, asserted in an affidavit that the shares giving it ownership of both resorts were valued at $146m in the company’s most recent audited financial statements. And an appraisal conducted earlier this year had priced the combined real estate worth of the two properties at between $232.7m and $355.1m.

“CCA (Bahamas), a Bahamian company, is primarily a holding company whose only material assets are its interests in two Bahamian subsidiaries. These two subsidiaries together own two hotels in Nassau, Bahamas: The British Colonial Hotel & Office Complex and the Margaritaville Beach Resort complex,” he said.

“Earlier this year, CCA (Bahamas) obtained appraisals of the two hotels from Cushman & Wakefield and Jones Lang LaSalle (JLL). Cushman and JLL appraised the collective value of the hotels as between $232.7m and $355.1m. CCA (Bahamas) would be willing to provide those valuation reports to the court [privately] and under seal, and to make them available to plaintiff subject to an appropriate confidentiality order.”

Reasserting CCA’s position that surety financiers would not accept the two Nassau resorts as collateral for the proposed $1.9bn bond, Mr Ju added: “Nonetheless, independent of any bond, CCA Bahamas is willing to pledge its shares of its two subsidiaries as security against the judgment.

“Those shares were carried on CCA Bahamas’ books in its most recent audited financial statement at approximately $146m. CCA Bahamas would be willing to provide that statement to the court in [private] or under seal, and to make it available to plaintiff subject to an appropriate confidentiality order. CCA Bahamas intends to continue to operate the hotels in the regular course during the pendency of this appeal.”