BML Properties Ltd, the original developer of Bahamas resort Baha Mar before a dispute with former construction partner China Construction America (CCA) saw it lose control, has filed Winding Up Petitions in the Supreme Court of the Bahamas seeking the “orderly liquidation” of CCA entities.
The Winding Up Petitions come after CCA Construction Inc sought bankruptcy protection in the US Bankruptcy Court for the District of New Jersey in December.
CCA was in October ordered to pay BML Properties a total of US$1.6 billion after a trial court found it had committed “many acts of fraud” in assuming control of the property in 2015. It has since filed counterclaims.
Baha Mar is currently operated by Hong Kong jewelry giant Chow Tai Fook Enterprises, which also holds interests in Australia’s Star Entertainment Group and Vietnam’s Hoiana. Chow Tai Fook also has links to Macau concessionaire SJM via chairman Henry Cheng’s 10% stake in STDM.
According to details of the Winding Up Petitions, BML properties is seeking the court appointment of joint liquidators from KPMG Bahamas Ltd and KPMG Ireland to carry out the winding up of the companies, under which scenario they would “take custody of the assets, ensure their proper operation and investigate financial and other wrongdoings by the Bahamian CCA companies.”
CCA Bahamas’ direct holdings, it added, include the Margaritaville Beach Resort and British Colonial, although BML states that the combined value of the hotels is a “mere fraction of the judgment.”
“We are seeking the protection of court-appointed guardians to ensure the continued stable operation of the hotels and preserving Bahamian jobs,” said Sarkis Izmirlian, chair of BML Properties Ltd.
CCA – a subsidiary of China’s state-owned China State Construction Engineering Corporation – has stated that it is “largely illiquid.”
The ongoing dispute between BML Properties and the CCA entities revolves around BML’s assertion that the entities breached an Investors’ Agreement (IA) by failing to meet construction deadlines and forcing the collapse of the project in order to enrich itself and ensure Chinese interests claimed control.
Izmirlian had, during the global financial crisis, sought funding to realise his vision for Baha Mar and found success to the tune of US$2.45 billion through China’s Exim Bank. However the bank also stipulated that CCA must be general contractor and with the right to import up to 8,000 Chinese construction workers, providing in the process a significant boost to China’s domestic economy. On top of Exim Bank’s contribution, CCA chipped in US$150 million and BML Properties US$845 million.
The resort had initially been slated to open in December 2014, but after missing the opening and a series of later dates throughout 2015, BML filed for bankruptcy in June 2015 while blaming CCA for allegedly deliberate poor craftmanship. Baha Mar was said to be 97% complete at that point.
It was also reported at the time that CCA employees had been found smuggling computers and documents – some seeming to acknowledge substandard work – from project offices.
While Izmirlian had hoped to retain control and bring in a different contractor, the Bahamian government – which saw Baha Mar as a key national project – had other ideas and the property was instead handed over to a liquidator. Construction ultimately halted for more than a year before the government announced it had reached a deal with CCA to resume construction while it looked for a buyer.
Chow Tai Fook, whose controlling Cheng family has long held close ties with Beijing, was ultimately revealed to be that buyer at an undisclosed price although rumors circulating at the time suggested the acquisition came at a massive discount.
In response to the recent US$1.6 billion against it, CCA has claimed that BML Properties brought about its own demise by “bombing” its own deliverables and failing to meet its own responsibilities in ensuring Baha Mar could open on its originally scheduled opening date of 27 March 2015.
