Baha Mar's contractor yesterday obtained an "emergency stay" to protect "hundreds" of Bahamian jobs and block the potential "liquidation" of its two Nassau resorts from Sarkis Izmirlian enforcing his $1.642bn award.

The New York State Supreme Court’s appeal division granted the interim injunction, which for the moment prevents Baha Mar’s original developer from collecting on the fruits of his comprehensive legal win, after China Construction America (CCA) and its affiliates pleaded poverty and warned they would “suffer catastrophic and irreparable harm” absent such a stay.

 The Chinese state-owned contractor moved rapidly to secure this relief because it was unable to obtain the near-$2bn bond required by New York State Supreme Court rules to gain an “automatic stay” of any judgment it issues. Branding the sum awarded against it as “breathtaking”, CCA alleged that the damages handed to Mr Izmirlian are “several times’ the combined value” of itself and its affiliates.

 Their most valuable assets were described as "two hotels in Nassau, Bahamas" which, although not specifically named in CCA's November 1, 2024, legal filings are clearly downtown's British Colonial property as well as the Margaritaville Beach Resort that sits at the heart of the adjacent Pointe complex. However, as "illiquid" real estate assets, neither could be pledged as collateral to secure the required bond.

The Chinese contractor warned that, unless it obtained a stay, any bid by Mr Izmirlian to enforce the fraud and breach of contract damages awarded to him over his ousting from Baha Mar would drive it into insolvency and, subsequently, either bankruptcy in the US or "liquidation proceedings" in The Bahamas - the latter of which would inevitably hurt the two resorts.

 A surety bond broker, used by CCA as an expert witness, besides asserting that there is "no ability" to use the resorts as collateral for the security demanded by the New York court also argued that financiers will shy away from Bahamas-based assets due to perceived challenges with enforcing agreements and potentially having to deal with this nation's court system.

 Mark Goodman, an attorney with CCA's US attorneys, Debevoise & Plimpton, in a November 1, 2024, affidavit alleged: "Defendants are ongoing businesses facing a judgment that is several times their combined value even under the most optimistic assumptions. The judgment is far more than any defendant could possibly satisfy."

 Describing CCA as a New Jersey-based construction company whose primary asset is the equity ownership stakes it holds in its subsidiaries, Mr Goodman sought to portray the contractor and its affiliates as having minimal worth.

 He added that China State Construction and Engineering Corporation (Bahamas) was merely a Bahamian special purpose vehicle (SPV) "that has no meaningful assets" after it lost its $150m preference share investment when Baha Mar was liquidated, while its $248m counterclaim against Mr Izmirlian was last month dismissed by the New York court.

 As for CCA's own Bahamian subsidiary, CCA Bahamas, he added that its "principal assets are its ownership interests in two subsidiaries, which together own and operate two hotels in Nassau, Bahamas, and no surety firm would accept its assets as a form of collateral on a supersedeas bond".

 "Absent a stay of enforcement, some or all of the defendants may be forced to file for bankruptcy in the US or initiate liquidation proceedings in The Bahamas," Mr Goodman added. "In this case, bankruptcy or insolvency proceedings would harm not only defendants but non-parties as well.

 "The two hotels CCA Bahamas owns employ hundreds of people. And CCA provides shared services, including communications, accounting, information technology and other general administration services, to non-party affiliates engaged in ongoing construction projects.

 "Defendants have diligently sought to avoid this outcome. They approached several bonding companies, but none were willing to provide a bond in any amount. A discretionary stay of enforcement is the only means by which defendants can preserve their assets while pursuing their right to appeal."

 Mr Izmirlian is opposing CCA's efforts to at the very least delay his collection of the damages awarded to him. And the New York State Supreme Court's appeal division yesterday said it will hold an "expedited" full hearing on the issue to determine whether the "stay" should endure until the contractor's full appeal is determined - a process that could take between one to two years.

 Neil Pedersen, president of Pedersen & Sons Surety Bond Agency, which was hired by CCA and its affiliates to procure the security demanded by the New York court, alleged that in this case some $1.98bn would be required given the scale of Mr Izmirlian's legal success.

 Noting that the court's rules also require that the bond cover appeal costs, Mr Pedersen alleged: "New York State statutory post-judgment interest will continue to accrue at 9 percent per year. The time to appeal varies. Additionally, in New York state, an appellate court can award a greater sum than the judgment. The bond itself cannot be issued in an unlimited sum.

 "My office generally suggests using a bond in the amount of 120 percent of the judgment, which takes into account a little over two years' post-judgment interest. Here, considering the $845m judgment, pre-judgment interest and post-judgment interest, a bond of a $1.98bn could, in my opinion, be reasonably expected to be sufficient to obtain the automatic stay."

 Besides the $845m awarded to Mr Izmirlian as compensation for his lost Baha Mar equity investment, the original developer also gained $68.56m from 9 percent interest covering the period May 1, 2014, to March 31, 2015. And a further $729.038m in interest, also at a 9 percent rate, was awarded for the period April 1, 2015, to the date of last month's judgment and continues to accrue.

 Mr Pedersen described the $1.98bn bond needed by CCA as "exceptionally large", and would have to be underwritten by a consortium or syndicate of financiers with several "anchors" contributing $500m each. However, he alleged that obtaining it is "impossible under the circumstances in this case" as the funders would require liquid cash - via instruments such as letters of credit - as protection in the event of a payout.

 "I have been provided valuation reports for certain hotels and assets owned by one of the defendants and located in The Bahamas," Mr Pedersen added, referring to the British Colonial and Margaritaville Beach Resort. "I was asked to provide information about the ability to use the assets as collateral to secure a bond. As far as I am aware, there is no ability to use the hotels as collateral.

 "Surety is not asset-based lending. Real estate, along with other non-liquid forms of collateral, are not preferred types of collateral especially for a matter of this large. Few companies take real estate as collateral. Real estate is not easily liquidated.

 "The foreclosure process for real estate can be a multi-year proceeding. Once an appeal is decided, a surety has a short window to satisfy a judgment while it could take years to foreclose on an asset and ultimately sell the real estate."

 Pointing to further issues with using the two downtown Nassau resorts as security, Mr Pedersen added: "From the perspective of a surety bond provider, another issue with taking the indemnity of an entity whose assets are located in The Bahamas is that it is difficult to enforce an indemnity agreement in that jurisdiction.

 "The possibility of dealing with a foreign court related to a possible future claim proceeding is not a favourable underwriting factor when underwriting an appeal bond. In addition, jurisdictions like The Bahamas can make it difficult for a surety to enforce its indemnity agreement....

 "In my career, I have been involved in the issuance of thousands of bonds. I have never seen, nor heard of, an appeal bond of this size, for a company -or companies- in the financial position of the defendants. For the foregoing reasons, and after the efforts made, obtaining an appeal bond is not possible under these circumstances."

 CCA's legal filings seemingly contradict assertions by Fred Mitchell, minister of foreign affairs and PLP chairman, that the Chinese contractor's dispute with Mr Izmirlian is a private legal battle with no other consequences given the potential negative fall-out for the British Colonial, Margaritaville Beach Resort and their hundreds of employees should a bankruptcy or liquidation ultimately result.

 James McMahon, another member of CCA's legal team, warned bluntly in a November 1, 2024, legal filing: "Enforcement proceedings could jeopardise CCA's ability to pay its employees and fund its ongoing businesses, creating a substantial risk that CCA would be forced into bankruptcy proceedings."

 And Xin Fu, China State Construction and Engineering Corporation (Bahamas) president, added: "If enforcement of the judgment is not stayed pending appeal, China State Construction and Engineering Corporation (Bahamas) will be rendered insolvent."

 Observers will likely see a certain irony in CCA's predicament given that Judge Andrew Borrok ruled it used $54m, which it urged Mr Izmirlian to procure from Baha Mar's lender to settle debts owed to sub-contractors, to instead fund its British Colonial acquisition in late 2014. Now that same resort is allegedly threatened with liquidation if Mr Izmirlian moves to collect on a verdict stemming from those very same CCA actions.

 However, it is unlikely that Beijing will want to endure the embarrassment of a Chinese state-owned company being forced into bankruptcy or liquidation - especially in the US. CCA's ultimate parent, China State Construction and Engineering Corporation, was said as recently as 2019 to have generated $205.8bn in annual revenues and reached 18th in the Fortune Global 500.

 Therefore, it should have sufficient assets to cover the damages awarded to Mr Izmirlian should he prevail on appeal. The latest developments also bear an uncanny resemblance to the plot laid out last week by Dionisio D'Aguilar, one of Mr Izmirlian's key allies, who both suggested CCA could file for bankruptcy and would likely face a near-$2bn damages bill if their appeal fails.

 Mr D'Aguilar, who sat on Baha Mar’s Board as a director prior to the original developer’s ousting and his own later appointment as minister of tourism and aviation, simply said yesterday of CCA: "They should settle."

 He had argued last week: “Another alternative that they have is to simply declare bankruptcy, but I cannot imagine a Chinese subsidiary of China State Construction and Engineering Corporation (CSCEC) would take that route.

 “It would be hugely embarrassing for the parent company that, when found wrong, this is the route they decide to take to protect themselves from the risk. I’m sure it’s an option. I don’t know of any Chinese company ever doing that. Declaring bankruptcy to protect yourself from the award, no Chinese state-owned company has ever done that.”

 CCA, in its legal filings, asserted that the "stay" is required "to prevent gross injustice". It added: "The decision imposes $1/6bn in liabilities on companies worth nowhere close to that. The decision is egregiously wrong. But if it does into effect the defendants will be insolvent."

 Mr Goodman, on the Chinese state-owned contractor's behalf, added: "The decision, which saddles defendants with a breathtaking $1.6bn in liability, rests on numerous errors of law and fact. The Decision also erroneously treats all three defendants as a single entity when only one (CSCEC Bahamas) signed the contract alleged to be breached and another (CCA) was not involved at all in the construction project at issue.

 "Without a stay of enforcement, defendants may never be able to exercise their rights to appeal the decision and clear their names.... At the same time, the judgment’s size means that if plaintiff is allowed to commence enforcement proceedings, defendants will be forced into insolvency.

 "Defendants plan to perfect their appeal within eight weeks of filing their notice, far earlier than the six-month time frame provided for in the [New York court rules], and the appeal may be resolved within several months. Plaintiff’s potential recovery would be protected in the meantime," Mr Goodman added. "Defendants intend to perfect by December 30, 2024, so this court may hear the appeals in the March term.

 "A stay would allow defendants to continue to generate value while the appeal is pending, and post-judgment interest would continue to accrue. Defendants would not, and could not, dispose of or transfer their assets while this appeal is pending. And, as defendants already disclosed to plaintiff, the vast bulk of defendants’ value are in its ownership of two well-known hotels in The Bahamas."

While the government would not confirm whether the Royal Caribbean Group (RCG) has presented a new proposal for the development of its Royal Beach Club project on Paradise Island, Deputy Prime Minister and Minister of Tourism, Investments and Aviation Chester Cooper has confirmed that discussions continue.

The $110 million project proposed for the western portion of the island involved the leasing of Crown land, a portion of which remains under litigation.

Guardian Business understands the new proposal submitted to the government from RCG reimagines the project on a smaller portion of Crown land, that does not include the portion of the property which is embroiled in a court battle between the government and Paradise Island Lighthouse & Beach Club Co. Ltd. (PILBC), which first proposed plans to transform the land containing an historic lighthouse into a beach club.

"Government is in ongoing dialogue with RCCL in relation to its proposed development on PI. This does not include any discussion in relation to land that is in dispute," Cooper said when asked to confirm if a new proposal was before Cabinet.

"The matter with Toby Smith remains before the court and we are not at liberty to speak to it."

Last week, Office of the Prime Minister Press Secretary Clint Watson informed the media that the government recently held a meeting with Smith, the principal of PILBC.

"If it is that Royal Caribbean Cruise Lines is negotiating land that does not include my Crown land lease parcels, that would be a major win for The Bahamas and a major win for Bahamians where we are not giving up more Bahamian Crown land for the financial benefit of a foreigner," Smith told Guardian Business yesterday when contacted for comment.

"While Royal Caribbean touts The Bahamas as being its number one destination and supports the likes of Bahamas Feeding Network and takes its employees on cruises, the financial imbalance continues to be hugely tipped on the side of Royal Caribbean Cruise Line. And those revenues are being exported out of The Bahamas without Bahamians even getting to see them. It's my position as a proud Bahamian to even the balance, where Bahamians receive a greater piece of the pie.

"The cruise lines are asking for Bahamian experiences and excursions, and Paradise Lighthouse and Beach Club is doing exactly that. The Nassau Cruise Port is encouraging Bahamians to offer a Bahamian experience and our culture, and Paradise Island Lighthouse and Beach Club is also doing that."

There had been concerns within the cruise industry that Royal Caribbean's silence on its multimillion-dollar project, which originally had a start day of October 2022 and completion date of May 2023, had been canceled.

However, Royal Caribbean Cruise Blog reported last week that in December 2022, Royal Caribbean International President and Chief Executive Officer Michael Bayley confirmed that multiple projects, including its beach club on Paradise Island, are still in the works.

"We have multiple other port type projects that are still operating. They're still in place. Our ambition is to continue with our strategy, but obviously we have to be mindful of all of the various issues that came from the pandemic," Bayley reportedly said.

"My ambition is to as quickly as possible... to get the capital to continue to create these products for the business."

The Beach Club, according to RCG, touts an array of activities available to guests, including, but not limited to snorkeling, scuba diving, kayaking, jet-skiing, floating mat rental, inflatable water slides, parasailing, nature hikes, volleyball and other beach- and water-related activities.

RCG has estimated that its project would have a $1 billion economic impact on the country's economy over 10 years through guest spend, government taxes and other expenditures.

The company has pledged to hire 250 Bahamians for the project's construction and operations phases.

The post DPM: Ongoing dialogue with Royal Caribbean on beach club appeared first on The Nassau Guardian.

The post DPM: Ongoing dialogue with Royal Caribbean on beach club appeared first on The Nassau Guardian.

ELEUTHERA, The Bahamas – Works and Utilities Minister the Hon. Alfred Sears is appealing to persons responsible for unregulated construction of buildings in the Blackwood community of north Eleuthera to cease.

Minister Sears, whose purview includes infrastructure, building control and town planning, along with a team of officials from his Ministry, toured the community, September 22, 2022 during an infrastructural assessment visit to Eleuthera.  Also on the walking tour were: island administrators, representatives of the Commonage Committee, Local Government representatives, members of the Royal Bahamas Police Force and other government agencies.

Said Minister Sears, “We have toured the area and will be having our Building Control, with other government agencies, work closely with the Commonage Committee of Spanish wells, the owner of that area, and meet with stakeholders so we can address the issue and ensure first of all that we will put a stop to any further unregulated construction and regularize the construction that has been done. We will be meeting with the Commonage Committee and will be announcing shortly the way forward.

 “Those homes would have been built without building control, town planning and without any inspection to ensure compliance with the building code.

“In light of what has happened in Grand Bahama and Abaco during Hurricane Dorian in 2019, we are fearful on a number of grounds. We have spoken with the Commonage Committee; they have not given permission to build on the property and our Building Control officers have indicated that no applications were made, no inspections were made. We see electrical connections which appear to be irregular and therefore it is incumbent upon me as the minister responsible under the Building Control Regulation and the Planning and Subdivision Act to ensure that a proper and full investigation is done.”

Minister Sears thanked George Sweeting, Chairman of the Spanish Wells Commonage Committee and Chief Councilor Robert Roberts, who led the tour; and he expressed emphatically that throughout the Commonwealth of The Bahamas the government will not tolerate unregulated construction.

“It is a danger to the people themselves, to the community and of course we have to uphold the rule of law. As we build we have to build with resilience because we saw what happened in Abaco and East Grand Bahama.

“We will call for a meeting with all of the stakeholders and we will resolve this matter in accordance with the law. We recognize that we are dealing with communities. These issues require a multidimensional response, which we will do.

 “I am asking all of the persons in Blackwood to cease any further construction; failing which we will have no choice but to actively enforce the law.

“We would like to go through a process of notice which the law requires before any demolition. We would like to engage because children are involved [and] we need to ascertain who the people are. We want to have everybody come forth and for us to see if it is possible to get people regularized but we cannot afford and we would not tolerate unpermitted construction of this magnitude because the people in the community are at risk. We saw what happened in The Mudd we saw what happened in Pigeon Pea. We cannot allow a situation to become a mass disaster; plus we have to be compliant with the law.”

Minister Sears informed that the Building Control Unit has already submitted a report and BPL and WSC will be asked to do likewise.

“We are in the middle of a hurricane season so it’s a matter of extreme urgency because this community is at risk. Also, we have to make sure we are apprised of all of the relevant factors so that an effective and humane solution can be implemented.

Chairman Sweeting said, “When we reformed the Commonage Committee in 2018 we met the problem. From 2019 to the present it has exploded. From 2019 we have documented photographic evidence of 168 either new additions or new homes being built all without any permission of the Commonage Committee. The total amount of photographic evidence from 2018 to present is almost 400. We have reports of them starting a home at 2 o’clock in the morning and moving in 6 o’clock in the afternoon.”

Town Planning Committee Chairman Keenan Johnson said, “It’s up for us to go to the discussion table and make a decision that’s based on the law and based on a humane approach. It’s about helping them as well it’s not just about enforcing laws; it’s about helping the people here to ensure they are safe and these structures that are being built illegally are not safe.”

Minister Sears was primarily in Eleuthera to view public infrastructure and participate in a Town Meeting to discuss and address planning issues related to the proposed replacement of the Glass Window Bridge on that island.   (BIS Photos/Ulric Woodside)

Revealing that modular offices for displaced Grand Bahama International Airport (GBIA) workers have arrived in the country and will be installed in short order, Deputy Prime Minister and Minister of Tourism, Investments and Aviation Chester Cooper has defended the Davis administration's efforts to improve the facility.

He was responding to Opposition Leader Michael Pintard, who last week called on the government to urgently reveal its “macro plan” for the redevelopment of GBIA.

Cooper said before Pintard demands answers he should “apologize to the people of Grand Bahama for how abysmally the last administration treated them”.

“It is most astounding that while he is giving suggestions, neither shame nor humility compels him to acknowledge how terribly the last administration, during which he sat in Cabinet, failed Grand Bahama. Hurricane Dorian struck in 2019, and the FNM did nothing. They let the airport languish for nearly two years before purchasing it and then did nothing up to the time they were voted out of office,” Cooper said in a statement released on Friday.

“This despite Michael Pintard being the member of Parliament for Marco City, one of five MPs from Grand Bahama and a senior member of the Minnis administration. He is intimately familiar with this airport because he travelled in and out of it consistently yet said nothing and, again, did nothing to improve the storm-tattered facility. Meantime, public servants operated in the elements and used out houses to relieve themselves.”

Cooper has announced that the government has shortlisted three entities for the redevelopment and management of a new world-class airport on Grand Bahama. It is expected to be built alongside the redevelopment of the Grand Lucayan resort and is promised to be completed by January 2025.

Cooper said in the meantime the government has taken steps to make the current facility as comfortable as possible for employees and travelers.

“Since coming to office our administration has done the following: ordered modular offices for displaced workers. Those units have arrived and will be installed in short order. It has also ordered and installed generators in all areas of the airport to facilitate its safe operation. Earlier this year, due to Grand Bahama Power Company outages, many residents and guests were stranded as a result of the neglect of the last administration, of which Pintard was a part,” he said.

“We have ordered elevators for the control tower several months ago, for the comfort and safety of workers. There is significant lead time on these items due to global supply chain issues and we anticipate they will arrive and be installed in due course. We demolished one of the storm-tattered warehouses, which was a depressing reminder of the ravages of Hurricane Dorian; and undertook a request for proposals for a public-private partnership (PPP) to convert GBIA. We have shortlisted three entities.

“We embarked on an aggressive plan to build a world-class airport and committed to have it completed by 2025; and increased airlift services from major gateways, notably Ft. Lauderdale and Orlando. We will launch a North Carolina route in November 2022. We will be announcing additional airlift shortly. We coordinated and collaborated with the Ministry of Tourism and the Ministry for Grand Bahama and stakeholders to advance the aviation sector and support the tourism sector and overall economy of Grand Bahama Island; and sourced quotes to convert the former domestic terminal to usable space. We will continue to invest modestly to comfortably accommodate our guests and our staff as we build a world-class airport.”

GBIA has been in disrepair since 2019, when Hurricane Dorian caused an estimated $60 million in damage.

The request for proposals (RFP) for a PPP to design, manage, build and finance the airport closed on May 15.