THE RT. HON. PERRY G. CHRISTIE, M.P.
PRIME MINISTER & MINISTER OF FINANCE
ON THE ACQUISITION OF THE BAHA MAR RESORT
BY CTF BM HOLDINGS LTD.
(A SUBSIDIARY OF CHOW TAI FOOK ENTERPRISES LTD)
MONDAY, 12TH DECEMBER, 2016
It gives me great pleasure to announce that the Baha Mar Resort is being sold to a world-class hotel owner, property developer, and business conglomerate, CTF BM Holdings Ltd. (a subsidiary of the Hong Kong conglomerate – Chow Tai Fook Enterprises Ltd.).
The executed Sale and Purchase Agreement represents a significant achievement for The Bahamas, and a milestone in the troubled history of the Baha Mar Resort.
I take this opportunity to unfold, in a chronological order, the steps my Government has taken to reach this successful outcome; beginning with the Chapter 11 Bankruptcy filing, the negotiations, the Court interventions, the Bidding process, and culminating with an overview of the Purchaser, CTF, and its vision for the Baha Mar Resort. To put this agreement in context and to appreciate its immense importance to the people of The Bahamas and our national economy, it is helpful to consider the scope and review the recent history of the Baha Mar Project.
BACKGROUND & NEGOTIATIONS
Baha Mar is an enormous development and once complete, will be among the largest destination resorts in the Caribbean, employing thousands of Bahamians. The Project is comprised of four new hotels in addition to the existing Melia hotel, boasting more than 3,000 guest rooms, a new 95,000 square foot casino, a new 200,000 square foot convention centre, 60,000 square feet of retail space, a new 18-hole [Jack Nicklaus] golf course, a racquet club.
The Resort was first scheduled to open in December 2014, then postponed to March 2015. Both dates were missed, and although construction was more than 95% complete, disputes with the Developer, Mr. Sarkis Izmirlian led China Construction America to stop work, and the Export-Import Bank of China to halt lending.
On 29 June 2015, the Baha Mar group of companies suddenly and unexpectedly filed for Chapter 11 Bankruptcy in Delaware, without the knowledge of the Government and people of The Bahamas.
Subsequently, the Baha Mar group of Companies applied to the Supreme Court of The Bahamas to have the Bahamian courts recognize the Chapter 11 proceedings and give effect to them in The Bahamas; an application that the Government opposed. This application was heard on 20th July, 2015 by the Honourable Ian Winder who, on the 22nd July, 2015 in an oral ruling refused to grant recognition to the Chapter 11 proceedings and later dismissed the summons.
We were advised by our US and UK lawyers that the Chapter 11 proceedings in Delaware offered no realistic prospect for a successful reorganization of Baha Mar. Those proceedings did however place Baha Mar, a Bahamian resort, owned by Bahamian Companies and indebted to thousands of Bahamian creditors subject to the supervision of the Court in Delaware. To soften the impact of Baha Mar’s insolvency on its Bahamian employees, the Government, for the first few weeks following the bankruptcy filing applied amounts owed to Baha Mar to meet its unpaid payroll obligations.
Baha Mar’s insolvency led to lay-offs of more than 2,000 employees, cancellation of hundreds of advance room reservations, enormous revenue losses, and downgrading of the sovereign debt of The Bahamas.
Day and night, assisted by a dedicated team inclusive of our US and UK lawyers, I drove the effort to find a solution to this disquieting situation. We engaged in marathon negotiations with all relevant parties on the terms of a global settlement; and assiduously moved negotiations forward. In addition to countless hours of conference calls, by invitation the Bahamian Government participants travelled to Beijing three times, and the Bank and CCA officers travelled to Nassau twice, all in an effort to resolve all issues between Mr. Izmirlian, The Export-Import Bank of China, and China Construction America – but to no avail. Throughout the negotiations, we have first and foremost been mindful of the impact that this stalled development has had on our people and our country.
Following failed negotiations, on 16th July, 2015, the Honourable Attorney General filed a petition for the winding-up of the Baha Mar group of Companies and applied for the appointment of Joint Provisional Liquidators. The Supreme Court agreed that there was no justification for subordinating Bahamian insolvency proceedings to be under the jurisdiction of the court of Delaware or for compelling thousands of Bahamian creditors to participate in such bankruptcy proceedings.
In October 2015, the Export-Import Bank of China, as secured creditor, exercised its right under the Debenture, and appointed Joint Receiver Managers to take control of Baha Mar’s properties.
At that time that the Chapter 11 was filed, tens of millions of dollars were owed to the Bahamian creditors. The Government’s Bahamian, UK and U.S. expert advisors warned that as a result of Baha Mar’s Chapter 11 filings and the evidence filed therein, Bahamian creditors had little or no prospect of being paid any sums owed to them.
Amidst the complex and arduous negotiations, my Government and I remained focused on achieving three (3) main objectives:
(i) Firstly, ensuring immediate remobilization and resumption of
construction, based on committed funding sufficient to complete construction and to open all parts of the Project;
(ii) Secondly, the opening of the Casino, Casino Hotel, Convention Centre, Convention Hotel and Golf Course prior to the end of the 2016-2017winter season;
(iii) And thirdly, settlement and/or payment of all valid claims of contractors and subcontractors, suppliers, and employees and other Baha Mar and CCA creditors.
These objectives were embedded in the Heads of Terms date 22 August, 2016 between the Government, the Export-Import Bank of China, Perfect Luck Claims Limited, and Perfect Luck Assets Limited, and remained the overarching priorities of the Government. We are pleased to have achieved all of the overlying objectives through the valiant efforts of my colleagues and members of staff. The casino and casino hotel, the convention centre and the golf course are on track to open before the end of the 2016-2017 winter season.
Entrenched in the Heads of Terms, the Bank committed to fund all remaining construction costs to complete the Project and inject $101.5 million towards payment of employees and unsecured creditors. This sum represents an ex-gratia payment made by Exim Bank to the unsecured creditors to accommodate the request of the Government. Hundreds of former Bahamian employees of Baha Mar have received the outstanding amounts due to them: unpaid salaries, severance pay, accrued vacation pay, and notice payments due to termination. Sums deducted from employees and former employees’ salaries and pension contributions are also being paid. Other Bahamian creditors and contractors have been receiving a significant part, and in some cases, all of the value of their claims.
A Claims Committee, chaired by His Excellency James Smith have made various announcements and continue to make payments to all valid claims of contractors and subcontractors, suppliers, and employees and other Baha Mar creditors. I am told that arrangements, including payment, have been concluded with almost 90% of the unsecured creditors.
Additionally, the Government of The Bahamas and the Bahamian utility companies, such as Bahamas Power & Light, have received payment from Exim Bank for some of their unsecured outstanding claims against the Baha Mar Companies.
Remobilization is underway and many of the same people and companies who were previously contracted can expect to be or have been re-engaged to complete the Project.
BIDDING PROCESS & BINDING SPA
The Joint Receiver Managers, with the assistance of Colliers Macaulay Nichols Inc. as their global real estate agent, were charged with pursuing a thorough marketing and sales process designed to identify an optimal purchaser for Baha Mar. We were advised that all of the bids were evaluated and rejected and that as a result Exim Bank subsequently entered into negotiations with other interested parties.
We were subsequently advised by EximBank that after careful consideration, CTF emerged as the best and most qualified buyer.
Much has been made of the fact that the arrangements remain under Seal in the Supreme Court of The Bahamas. The application to have the documents sealed was made by the Export-Import Bank of China. As I have advised in a previous Communication a request for documents of this nature to remain sealed is not unusual, particularly in transaction of this complexity, scale, and most importantly, international market sensitivity.
The Bahamian Supreme Court approved the sealing of the documents to assist in ensuring that the parties secure the best outcome for the Property.
A Sale and Purchase Agreement has been executed; however, there still remains outstanding conditions precedent and negotiations between the Bank and CTF for various ancillary agreements. Maintaining all court filed documents under seal enables the Bank and CTF to finalize these sensitive negotiations with the normal business confidences that one would expect.
I take this opportunity to nullify any suggestions that the Government has provided unusual concessions to conclude this deal. It is not unique to The Bahamas to provide concessions to attract and encourage investment; and it is not unique to this Project, that concessions will be provided on a proportionate basis to the development. Most Countries offer concessions, trade agreements contemplate concessions, and further, our laws provide for concessions to all qualifying investors. The previous Government also granted concessions to investors, including Baha Mar.
To reiterate what I have already cited, much of the detailed information surrounding this acquisition remains sealed and I am only able to speak within the confines of the Court Order. I can however disclose that the construction concessions provided to CCA by my Government; are identical to those provided by the former administration.
Further, I can state unequivocally that successive Governments of The Bahamas are constrained and bound by the Heads of Agreements provided with respect to the Atlantis Resort.
It is contemplated that CTF will receive the concessions provided to Baha Mar, as applicable. The Government intends to enter into a Heads of Agreement with CTF to outline all obligations, and concessions provided. It is fair to say that the categories of concessions being considered are not different than those offered by the previous Government (the FNM). This Heads of Agreement the main terms of which have been agreed, will shortly be completed, and will not be shrouded in mystery and speculation, as once executed, it will be tabled in this House, to ensure transparency and accountability.
I seize this opportunity to make all Bahamians aware that my Government is not deaf to the gossip and speculation and downright false allegations that have been concocted surrounding the Baha Mar dispute, its history, and its progress. Amidst such sensitive negotiations, this Government thought it wise not to offer a running commentary on the discussions, and moreover, not to say anything that might put the future of the project in jeopardy. It’s a shame that so many uninformed views were promoted. The last few weeks have involved a herculean effort and everyone involved did what it took to dive across the finish line.
OVERVIEW OF CTF, REMOBILISATION & JOBS/ECONOMIC GROWTH
CTF is a world-class developer with immense experience in global integrated resort development. CTF’s experience in tourism, hospitality, and real estate development spans across the globe, with subsidiaries managing or owning over 60 hotels worldwide. Some of its most iconic properties include the Beverly Wilshire, A Four Seasons Hotel (Los Angeles), The Carlyle, A Rosewood Hotel (New York), Rosewood London (London), and Grand Hyatt (Hong Kong). The Company also operates three resorts in the Caribbean – Jumby Bay, a Rosewood Resort in Antigua, Rosewood Tucker’s Point in Bermuda, and Rosewood Little Dix Bay in the British Virgin Islands (reopening in 2017). Baha Mar will soon join its impressive portfolio of development projects.
CTF and its operating Companies will have to meet the normal due diligence requirements of the Government, including the rigorous investigation and licensing process of the Gaming Board with respect to its casino operations.
Through its subsidiary Rosewood, CTF has been involved with Baha Mar since 2011 and knows firsthand the enormous potential of the development. The Bahamas and Baha Mar will enjoy great benefits from CTF’s involvement, particularly due to their expansive network and ability to open new markets of opportunity for The Bahamas. CTF has indicated its commitment to good governance, community outreach, and social responsibility in all of its business operations across the globe.
As a part of the remobilization efforts, CTF is already in place at the project and has been assiduously planning for the phased opening and coordinating matters with Perfect Luck, EXIM Bank, the Government, CCA, hotel operators, ad concessionaires. CTF has already engaged and had discussions with hotel brands involved in Baha Mar including the SLS Lux, Grand Hyatt, and its very own Rosewood to re-engage and bring the development to life. Resultantly, guests will be able to select from five distinctively different hotels, each designed to cater to the specific preferences of travelers seeking a truly luxurious, but uniquely Bahamian island vacation.
Despite the challenges that this development has endured, construction at the property has commenced once again and Baha Mar is now back on a path for phased opening, beginning in April, 2017 and full completion by next fall.
CTF has begun developing and planning for an extensive marketing plan. CTF has indicated its vision for the Resort as a sophisticated blend of luxury choice in lodging, entertainment, gaming, dining and retail – all while remaining uniquely and authentically Bahamian. To further substantiate its commitment, CTF has committed to invest tens of millions of dollars ahead of the phased opening through pre-opening activities, and employment.
Baha Mar is anticipated to generate approximately 315,000 additional air passenger guests annually to The Bahamas. This is a 19% increase over the total arrivals in 2015. The extensive improvement in conditions at the Lynden Pindling International Airport continues to bolster airline confidence and enthusiasm to facilitate growth of aircraft movements.
In the forthcoming months, imminent economic opportunities will be realized in more and more homes throughout The Bahamas. Baha mar will create an estimated 5,500 to 7,000 jobs for Bahamians. Furthermore Mr. speaker, the economic and fiscal affects will not only be felt by those Bahamians employed but will also benefit a plethora of Bahamian businesses both large and small. Baha mar will undoubtedly add to our tourism product, and significantly impact growth and economic prosperity in our Country.
This is a new day for The Bahamas.
At the invitation of the Principals of Chow Tai Fook Enterprises Ltd., an in-depth familiarization, verification and planning visit was made to the Hong Kong Headquarters of CTF last week by a Government delegation comprising of The Hon. Obediah Wilchcombe – Minister of Tourism & Minister Responsible for Gaming, The Hon. Allyson Maynard-Gibson, Q.C. – Attorney General & Minister of Legal Affairs, Sir Baltron Bethel – Senior Policy Advisor, Office of the Prime Minister and senior technical legal gaming and investment officials from the Office of the Attorney General, the Office of the Prime Minister and the Gaming Board.
Productive and rigorous exchanges took place with the Chairman of CTF and top executives of the Company’s extensive global enterprises who were assembled in Hong Kong to facilitate the successful outcome of the discussions. The Chairman Dr. Henry Cheng and top management expressed their commitment to a long term and cooperative relationship with the Government and people of The Bahamas, and to achieving a similar level of economic success that has made the family business one of the largest, diversified business conglomerates in Hong Kong, with strong emphasis on integrity and international best practices.
In discussing the Company’s extensive businesses and marketing plans, CTF laid emphasis on the creation of a world class product which would embrace top international and local entertainment, local art, culture, utilization of Bahamian products, training and education, encourage local entrepreneurship and establish a high-end shopping mecca. The Company emphasized it will offer cutting edge gaming, meet the highest standards of probity and operations as practiced in The Bahamas and other leading gaming jurisdictions.
CTF confirmed to the Bahamian delegation, its commitment for opening and expanding new markets out of North and South America, Asia and Europe, and to working cooperatively with the Ministry of Tourism, the Nassau Paradise Island Promotion Board, and N.A.D. (the Lynden Pindling International Airport) in supporting additional airlift and an aggressive marketing campaign.
The delegation reported to me that CTF has demonstrated to the delegation their track record as excellent owners and operators of convention centres operating the largest and most successful exhibition and convention centre in Asia, located in Hong Kong. Their meetings and conventions business in which The Bahamas has lost share, will be a central
feature of the new Baha Mar project operated by the Grand Hyatt, internationally recognized as the leader in attracting group business.
CTF’s future expansion calls for the creation of new attractions, the replacement of the Crystal Palace Hotel pod with a compelling new facility and to turn their offshore Island into a themed attraction. The developer further confirmed to the delegation that it will roll out a sustained local and international communications and public relations programme, highlighting both their bold new plans for The Bahamas as well as their global business enterprises. They will embrace the synergy to be achieved between their upscale customers in their multiple businesses, and their Bahamian resort project.
It was further gratifying during the delegation’s meetings with other leading international business investors in Hong Kong who are well known to my Government, to receive complimentary endorsements of CTF as the investor and operator of the mega Baha Mar project.
This outcome has arrived at under my continuous personal direction, and the efforts of my colleagues and members of staff who have work tirelessly, across time zones and language barriers. We have had the support of a competent team of legal and financial advisors in The Bahamas, Washington, and London. The Export-Import Bank of China has been involved every step of the way and we a grateful for the efforts made by all parties to fulfill the terms of our agreements for the remobilization and sale of the Baha Mar Resort.
Baha Mar is on track to realize its potential as a premier destination resort, a major employer, and an important contributor to the entire Bahamian economy. This outcome is good for The Bahamas, and great for the Bahamian people.
God bless the Commonwealth of The Bahamas.