Entities of China Construction America, Inc (CCA), the general contractor for Bahamas casino resort Baha Mar, has announced a “comprehensive agreement” with the property’s original owner BML Properties Ltd that it says resolves a US$1.6 billion legal dispute without any admission of liability.
According to information from the entities – CCA Construction, Inc, CCA Bahamas Ltd and CSCEC Bahamas Ltd – the agreement will see BML properties and its owner Sarkis Izmirlian drop all claims in the US and the Bahamas against the trio and their affiliates, subject to approval by the U.S. Bankruptcy Court in New Jersey. CCA says it hopes to obtain this approval in the coming days.
The agreement comes after CCA, a subsidiary of Chinese state-owned developer China State Construction Engineering, was last year ordered to pay US$1.6 billion to BML Properties after being found by a New York court to have committed “many acts of fraud” in assuming control of Baha Mar in 2016.
The CCA entities subsequently had an appeal of the decision dismissed before filing for chapter 11 bankruptcy – a move it says was pursued in parallel to protect the interests of the co-defendants’ stakeholders.
The exact terms of this “comprehensive agreement” between CCA and BML Properties have not been disclosed.
Yan Wei, Chairman and CEO of CCA, said, “We are pleased to have successfully resolved this matter and to move forward with clarity and certainty for our employees, customers and partners.
“While we remain convinced by the strength of our legal arguments, bringing this matter to a close is in the best interests of our stakeholders and will allow us to focus fully on our strategy for delivering world-class construction projects and hospitality operations to our customers.
“We thank our team and partners for their continued support and look forward to many opportunities together. We also want to extend our appreciation to the people and businesses of The Bahamas for their continued friendship and trust as we look to deepen our relationships in the country.”
The agreement will, CCA added, allow CCA Bahamas Ltd to retain its ownership interest in the British Colonial and Margaritaville Beach Resort hotels in Nassau, which it says “will benefit the entire Bahamian community well into the future”.
The dispute between BML Properties and the CCA entities revolved around BML’s assertion that the entities breached an Investors’ Agreement 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 realize 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 alleged 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.
Hong Kong jewelry giant 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.
Chow Tai Fook Enterprises also holds interests in Australia’s Star Entertainment Group and Vietnam’s Hoiana, and has historical links to Macau concessionaire SJM via chairman Henry Cheng’s 10% stake in STDM.
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