Talks in Beijing, China over a resolution for the Baha Mar fiasco are now “deeply flawed” and require an urgent course-correction before an agreement can be made between the parties.
Baha Mar President Tom Dunlap said the negotiating process has become “deeply flawed” in many of its basic presumptions and tenor and he believes China Construction America (CCA) is not operating in good faith.
He added that as a result, Baha Mar’s representatives did not attend the negotiations on Sunday.
The Bahama Journal was informed that Prime Minister Perry Christie and the Bahamian delegation became very furious over the “no show” by Baha Mar’s representatives and the prime minister scolded Baha Mar CEO Sarkis Izmirlian who was in Switzerland over the matter.
Following their failure to show up at the meeting, Mr. Dunlap said Baha Mar’s representatives made an offer to meet yesterday, if CCA would engage in serious and good faith negotiations.
However, Mr. Dunlap said there are some key milestones in the negotiation process that must be considered in order to reset the dynamics of the negotiations.
On June 11 Baha Mar and CCA reached an agreement in Beijing for Baha Mar to drop the $225 million claims against the construction company and agreed for each party to contribute an additional $75 million towards the project.
It was also agreed that CCA was to finalize construction by August 15, 2015 and China State Construction Engineering Corporation was to provide 20 experienced mechanical, engineering and plumbing and other expert managers to help belatedly finalize the project.
This agreement was documented by Baha Mar in a memorandum of understanding.
However, Mr. Dunlap explained that this agreement was not consummated because on June 18 a “mark-up” of the MOU was received from CCA, which significantly conditioned the additional equity contribution on firm commitments from the Export-Import Bank of China, deferred the loan guarantee to future board action, refused to pay liquidated damages for additional late delivery and required 50 per cent of retainage to be paid on achievement of TCO in contravention of the construction contract.
Negotiations resumed on July 13 in Beijing following the company’s Chapter 11 filing, this time with a four-party format that included Baha Mar and CCA, EXIM Bank and observers from the government of The Bahamas.
According to Mr. Dunlap, in these meetings Baha Mar made tremendous compromises with an offer to drop the UK litigation, to settle all claims and the cost of completion, made an agreement to settle the disputed amounts requiring payment to CSCEC of $35 million, provided and offer to fund $100 million and a $25 million letter of credit, and agreed to dismiss the Chapter 11 case.
“In particular, we presumed CSCEC and CCA would honour their stated commitment to provide a guaranty on the proposed new facility to the EXIM Bank in the amount of $175 million, as well accept a reduction in its preference share position and dividend return for the dismissal of the UK litigation and release of all claims,” Mr. Dunlap explained.
He said just as Baha Mar is willing to compromise CCA’s claims against the resort, CSCEC should compromise Baha Mar’s claims.
Mr. Dunlap said CSCEC also requested a “back-to-back” guaranty on the $175 million from Baha Mar and refused to budge one iota on the preference shares, but sought to position that its $100 million incremental funding would come in at a higher ranking than Baha Mar’s $100 million in the revised capital structure of the company.
Therefore, Baha Mar is demanding a counter-offer on the preference shares and would like the back-to-back guaranty and priority ranking issue dropped.
