By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s contractor yesterday slammed the bid by Sarkis Izmirlian to wind-up its two Nassau hotels as “meritless” while pledging to protect hundreds of Bahamian workers from potential “chaos”.

China Construction America (Bahamas), the entity that managed the Baha Mar project and now owns downtown Nassau’s British Colonial and Margaritaville Beach resorts, argued that the winding-up petition filed against itself and another locally-domiciled affiliate was mere “grandstanding” by Mr Izmirlian to distract from his likely defeat before the New York appeals court.

The Chinese state-owned contractor, which is contesting the $1.642bn damages awarded against it by the New York State Supreme Court in favour of Baha Mar’s original developer, asserted in a statement: “Along with its affiliate CSCEC (Bahamas), CCA Bahamas is disappointed that BML Properties has filed a meritless winding-up petition.

“CCA Bahamas will take all necessary steps to protect our employees and the Margaritaville Beach Resort and British Colonial hotel from BML Properties’ attempt to create chaos. The only threat to their jobs and operations is from BML Properties and its owner, Sarkis Izmirlian.”

In fact, Mr Izmirlian and his BML Properties vehicle have already pledged to protect the jobs of all British Colonial and Margaritaville Beach Resort employees regardless of the outcome of his winding-up petition that is now before the Bahamian Supreme Court. He is calling for the KPMG accounting firm to be appointed as liquidators for CCA (Bahamas) and CSCEC (Bahamas) on the basis both are insolvent.

CCA did not address the insolvency argument yesterday, instead merely reiterating: “BML Properties’ gross mismanagement drove the Baha Mar resort into receivership and its latest gambit in The Bahamas is nothing other than transparent grandstanding to distract from the prospect of defeat in our appeal in New York of the trial court’s flawed decision.

“It is telling that BML Properties’ response to receiving our opening brief on the appeal was to attempt to bypass the New York appellate process by means of this frivolous petition and to litigate by press release.” The original Baha Mar developer has moved against both companies in a bid to seize and secure control of the two Bahamian hotels that represent their most valuable assets.

CCA Bahamas and CSCEC Bahamas are two of the three CCA subsidiaries that have been ordered by the New York State Supreme Court to pay Mr Izmirlian $1.642bn in damages - a sum that is increasing daily.  The Chinese state-owned contractor has instead elected to appeal that verdict, while placing the last of its three defendant affiliates, CCA Construction Inc, into Chapter 11 bankruptcy protection in the US.

But, while that has protected CCA Construction Inc and its assets from any attempt by Mr Izmirlian to enforce his damages award against it, the same protections are not available to the Bahamas subsidiaries. And Baha Mar’s original developer has taken full advantage by targeting Bahamian resort assets said to have been valued at a combined $355.1m - less than one-fifth of his New York damages award.

However, while Mr Izmirlian has emphasised that his actions will not impact the hundreds of employees working at the British Colonial and Margaritaville Beach Resort regardless of the outcome, Michael Pintard, the Opposition’s leader, called on both Baha Mar’s original developer and CCA to provide greater reassurance on the issue.

“We are very concerned about job security for the employees. That’s the first thing,” Mr Pintard told Tribune Business. “We are cautiously optimistic given the reassurance given by Mr Izmirlian, but we’d like to hear more from all sides in terms of what specific actions they intend to take to insulate the hotels from having to lay-off employees or even worse.

“We’d like to hear more from both sides on how this process will evolve to protect the employees. The second concern is with the impact on the reputation of the jurisdiction. We want all sides to be mindful, while they are dealing with commercial matters, of the potential impact on the reputation of the jurisdiction as it relates to investor confidence and Baha Mar’s business, which on the surface is quite successful at the moment.

“We want to give that reassurance to the international community, so that people booking well in advance know there is no jeopardy to being able to facilitate that vacation dream,” Mr Pintard added. “This is a cautionary tale for the Government, and the PLP party, because it intervened in commercial matters and opened up the jurisdiction to reputational damage.

“It intervened in a way that opened them to accusations of collaboration with one side for political benefit. So the the Prime Minister has a duty, an obligation, to hold an inquiry [into the original Baha Mar’s liquidation] so as to protect the reputation of the jurisdiction. We have already called for it.”

Another of the ironies stemming from the winding-up petition is that one of the resorts involved, the British Colonial, was alleged to have been acquired by CCA using $54m that was supposed to have been earmarked instead for Baha Mar’s completion. This claim by Mr Izmirlian was upheld by the New York State Supreme Court.

Legal documents obtained by Tribune Business confirm that Mr Izmirlian and his BML Properties vehicle are petitioning for KPMG to be approved as court-appointed liquidators for the entity that owns the two Nassau resorts, CCA (Bahamas). And, if his bid succeeds, the accounting firm will also take control of another China Construction America (CCA) affiliate, CSCEC (Bahamas).

Whitney Thier, executive vice-president, general counsel and secretary for BML Properties, the corporate vehicle owned by Mr Izmirlian, cited the alleged insolvency of both CCA (Bahamas) and CSCEC (Bahamas) as the basis for the winding-up petition’s filing given previous admissions that they lacked the cash and other assets to settle the $1.642bn New York judgment.

“To-date, the company has failed and/or refused to pay or satisfy any part of the New York judgment debt which remains fully enforceable as against it,” Ms Thier said of CCA (Bahamas), “or to make any offer to the petitioner to secure or compound the same.

“In the premises, the company is insolvent within the meaning if section 186 (c) of the Companies Act chapter 308 as it is unable to pay the New York judgment debt that is overdue and/or the value of the New York judgment debt exceeds the company’s assets. Accordingly, the company should be wound-up by the honourable court.

“The company has stated that it is unable to pay the New York judgment, a debt now due, and that its value exceeds the value of the company’s assets.” CCA (Bahamas), according to a corporate chart released by the contractor itself, is the immediate parent for Neworld One Bay Street Ltd and Strategic Property Holding Ltd, which hold the British Colonial and Margaritaville Beach Resort respectively.

Pointing out that Mr Izmirlian’s damages became payable as of October 31, 2024, and that the New York appeals court lifted the temporary stay that previously barred its enforcement, Ms Thier cited numerous statements by CCA executives, its US attorneys and bond broker that showed the hotels’ immediate parent is insolvent.

As an example, Genguo Ju, CCA (Bahamas) executive vice-president, admitted in a November 1, 2024, affidavit that the combined value of the two Bahamian resorts is “a mere fraction” of the damages award. And, on the same day, Mark Goodman, one of CCA’s US attorneys, described the contractor’s affiliates as “largely illiquid entities” and affirmed enforcement of the judgment would make them insolvent.

Neil Pedersen, a bond agent, also asserted it was impossible to raise the $1.9bn security required for CCA to pursue its New York appeal against Mr Izmirlian’s award given “that there is a billion dollar liability with no ability to satisfy it.”

“In the light of the insolvency admissions, it is manifest that the company is unable to pay the New York judgment debt and also that the value of its liabilities exceeds its assets,” Ms Thier argued. “By reason of the foregoing, the company is both cash flow insolvent and balance sheet insolvent within both limbs of the meaning of ‘insolvent’ provided on section 187 (a) and (b) of the Companies Act.

“In the circumstances, it is just and equitable that the company should be wound-up.” Mr Izmirlian and BML Properties are thus petitioning the Supreme Court to appoint Simon Townend, KPMG (Bahamas) country managing partner, and fellow accountants, Jean K. Green-Thompson and James Neill, the latter from KPMG Ireland, as liquidators for both CCA (Bahamas) and CSCEC (Bahamas).

They would take control of both companies’ assets and operations, including the two Nassau resorts, if appointed. Mr Izmirlian and BML Properties said yesterday they are seeking an “orderly liquidation” of both companies to help partially recover some of the damages awarded by the New York courts. This signals he would likely seek a buyer for both the British Colonial and Margaritaville properties.

CSCEC Bahamas, the CSCEC standing for China State Construction Engineering Company, which is CCA’s Beijing-based parent, previously held $150m worth of preference shares in the original Baha Mar project prior to its eventual liquidation some eight years ago.

Mr Izmirlian’s winding-up move will also disrupt CCA’s ability to prosecute its New York appeal against his damages award. If the Supreme Court grants the winding-up petition, the actual standing or ability of the two Bahamian entities to participate in the proceedings alongside US-based CCA Construction Inc could be in jeopardy.

And it would be the KPMG liquidators, not CCA, taking all relevant decisions regarding the two Bahamian entities’ participation as they - instead of the contractor - will be in management and operational control. Baha Mar’s original developer has thus countered the impact of CCA Construction Inc’s Chapter 11 bankruptcy protection move.

CCA previously described the British Colonial and Margaritaville Beach Resort as the “only two significant assets” owned by itself and its affiliates. 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.