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Bahamas – Developer calls for transparency in Baha Mar sale

By - 19 April 2016

Baha Mar, the derailed casino resort mired in litigation since filing for and failing to secure Chapter 11 bankruptcy, is now up for sale with receivers Deloitte & Touche appointing Canadian property firm Colliers International to find its eventual owners.

Several names have been linked with taking the project on including Sol Kerzner, Andrew Farkas, Club Med, Cirque du Soleil, Fosun Group, Mohegan Sun and its initial developer BMD Holdings.

The $3.5bn hotel and casino complex is said to be 97 per cent complete with four hotels, 2,200 rooms, a casino, a 200,000-square-foot convention center and a Jack Nicklaus-designed golf course.
Potential suitors have though been banned from talking to anyone with an inside knowledge of the project including its original developer the Sarkis Izmirlian-owned BMD Holdings and the company who has built it; China Construction America (CCA).

Despite the potential for any due diligence regarding a sale being jeopardised, Colliers is prohibiting bidders from having any contact with Baha Mar’s creditors or suppliers along with former executive teams, employees or advisers without written consent from the receivers.

Instead interested parties must pay $50,000 for access to an electronic ‘data room’ containing specifics on the development. They will also have to sign a non-disclosure agreement overseen by Bahamian law.

Deloitte & Touche’s Raymond Winder said the aim was ‘to control the information’ to make sure it is consistent for each potential buyer. He added that due diligence wouldn’t be an issue as information would constantly be added to the ‘electronic data room.’

The move has raised questions over the transparency of the sale.
One observer said: “Why would the court approve this? You would be crazy to buy this without talking to the original developer.”
Colliers has not given a list price for the property but confirmed that more than $3bn had so far been spent on it.

The decision to sell has come after a six-month stand-off.

Izmirlian’s company BMD Holdings laid off 2,000 employees at Baha Mar in September and attempted to put the project into Chapter 11, a move that was blocked by the Bahamian government. The original developer recently asked government to fund the project toward fruition.

Representing BMD Holdings, Tom Dunlap said: “The Bahamian government must step up and act now on behalf of the unsecured creditors to fulfil its assurances. The government must now fund the liquidators so that they can do their job on behalf of Baha Mar’s unsecured creditors.”

Mr Winder revealed that the receivers had ‘rejected all offers received’ before launching the formal sales process saying that all offers had to go through the sales process as agreed by the courts.

“The courts have agreed a process to identify the potential bids, and select one of those bids as the ultimate purchaser for the property,” he advised. “It’s in the interests of the creditors and Sarkis, that we select the best bid.”

Whitney Their of BMD Holdings replied: “We are not labouring under any impression that we will be given an advantage over any other investor who bids to buy the project, and rather feel that we may be disadvantaged over any other investor given the response to our previous offers, made well before any official sale process was launched, was merely that they were unacceptable, with no explanation or further engagement. The receivers have not revealed what the Supreme Court order provides and have not outlined the process. We have previously inquired about the procedure to make a bid and associated timelines, only to be told that information is not currently available. Of what benefit to the stakeholders is it to continue to conceal this information, and what possible harm could it do to reveal it given the importance of this project to the country and the number of Bahamians so directly affected by its outcome?”

She added: “We applaud the statement that the receivers are duty bound to seek the best possible price for the asset for the benefit of the unsecured creditors, but first, a sales process that is opaque at best is not designed to achieve the highest price from a broad spectrum of investors, and second, we are unclear what the receivers are actually doing to maximise value.”

PDS Gaming, a company that specialises in customised financing solutions including equipment leasing for the gaming industry, had helped get the casino geared up for its March 2015 opening.
In court filings last year, PDS Gaming claimed it had installed 1,100 gaming devices for Baha Mar as outlined in a January 27, 2015, contract but that Baha Mar was $701,008 in arrears on two casino equipment rental contracts by July 2015. Around 630 slot machines are currently believed to be in the process of being removed from the property.

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