Can Baha Mar Be Trusted?
I am very concerned about the proposed Baha Mar project. Having heard from Mr. Sarkis Izmirlian, principal; Mr. Don Robinson, president, and Mr. Robert Sands, Senior V.P., Baha Mar, am not convinced that the project will be successful or should be approved.
I have also heard the comments and concerns raised by Prime Minister Hubert Ingraham, every day comments and read many commentaries in the newspaper.
What is most prominent is the question, can Baha Mar be trusted? Can Bahamians trust Baha Mar in their many pronouncements?
We were told that Baha Mar’s principal Sarkis Izmirlian and his family were billionaires, the point being, that they had the financial wherewithal to finance this project. This was the Izmirlian’s family’s deal and they had what was needed to finance it.
What happened? We were then told that the project required a major (meaning a financier of the project) equity partner, that was to be Lehman Brothers. They pulled out, not convinced that the project was economically feasible.
What happened? The project sat for 2 years, as Mr. Robinson and Sands admitted. Where was the Izmirlian’s money? The much touted billionaires! The gentlemen further admitted that they could not find any other financier, the world over! Again, the greatest hotel project in the Caribbean, to rival Kerzner by far-but no investors!
What happened? Enter the China Export-Import Bank and The China State Construction Engineering Corporation. Mr. Robinson admitted that the deal was attractive to the bank not for its profitability, but because the bank wanted to facilitate the exposure of the Chinese construction company-naturally, a national goal of China. As Mr. Robinson puts it, they wanted the world and particularly, this part of the world, supposedly the United States, to know that they had the capability to build such a project. We do not blame the Chinese for doing what is in their national interest. Let us not be fooled, their decision to finance and build the project has very little, if anything, to do with the profitability of the project. Also, if it went “belly-up” as we say, they would have the security of prime real estate on Cable Beach.
It begs the question, if this project is economically feasible, as touted, then why is it that no one/entity is prepared to invest in it due to its profitability?
Oh, we did not mention, the other national interest achieved by the Chinese. We do not blame them, they are acting in their interest, as they should. They get to employ 8,150 workers in The Bahamas at a time when China is faced with a serious challenge; creating jobs for the many persons who are moving from rural areas to cities.
What happened just last week? It is reported that a Brunei investment company, BMB Group, offered to buy Kerzner International for $4 billion. Could not Baha Mar interest the same investors or a similar group to invest in their great project? It seems not. Clearly, BMB does not have a difficulty investing very large sums in The Bahamas. Undoubtedly, they are sufficiently impressed with Kerzner International and convinced of its future prospects and profitability. The same could not be said for Baha Mar.
What next? Again, we thought the Izmirlians had some financial wherewithal, but so did Scotiabank. Why did it take months for the much touted billionaire Izmirlians to settle a “mere” and yes, a mere $210 million loan with Scotiabank? Let us be real, they want The Bahamas Government to approve a deal, according to Mr. Robinson, a 3.4 billion dollar deal ($2.6B loan from the Chinese and $800+ million in assets that “they” bring to the table – we will come back to this later) but they could not settle a mere$210 million loan with Scotiabank. That is just not real!
It begs the question, do the Izmirlians not have the confidence in the project or not have the money? It is one or the other. They are everywhere selling the project to Bahamians, doing their best to get Bahamians “on board” and ultimately pressure the government to approve the project when they cannot get anyone to finance it on a profit basis! In fact, they were not even prepared to pay Scotiabank the $210 million loaned, so as to demonstrate to all that they had and have the full confidence in the project and its economic viability. It is reported, at one point during the negotiations with Scotiabank that they were only about $35 million and 10 percent equity apart. Imagine, they wanted Scotiabank not to be paid in full, but to receive an equity stake-again, sharing the risk of the project. Where was and is their confidence?
The reality is that the construction of the project is being 100 percent financed by the Chinese Export-Import Bank-imagine that! The Izmirlians are not putting up one penny for the construction. To make the point further, they even got Scotiabank to be on the hook for an equity portion for the amount loaned.
That brings us back to the $800 million plus that Mr. Robinson claims is the value of the assets that the Izmirlians/Baha Mar are contributing to the project.
Where exactly did those assets come from? Fellow Bahamians, those are your assets. Recall, that the Izmirlians/Baha Mar, according to the prime minister, purchased the Sheraton for $30 million from the government – while the hotel was constructed by the government at a cost of $120 million, which does not include the value of the land! They purchased the Wyndham, Crystal Palace Casino and Nassau Beach Hotel for $150 million from Mr. Phil Ruffin (presumably for the appraised value) and paid the government for all of the other property it acquired (your assets) for about $60 million. That totals $240 million, but remember, the loan from Scotiabank was $210 million. The much touted billionaire Izmirlians, what was their outlay? A mere $30 million and even if you added the $80-90 million they initially said they put into the Sheraton (now Mr. Robinson says it is $100 million) that is still only $110-120 million at best! The difference in the $800+ million represents the value of your assets or at least $500+ million – half a billion dollars (accounting for the $160M-Ruffin purchase) that Perry Christie and the PLP gave to the Izmirlians and Baha Mar! The $500 million+ they claim that they are bringing to the project; all of us are bringing that to the project – it belongs to each of us.
If that is not enough, they have leveraged our $500 million+ to the Chinese Export-Import Bank and Scotiabank to obtain the loans. They admit that Scotiabank now has an equity in the project, all on the basis of your half billion dollars+ in real estate assets – thanks to Perry Christie and the PLP.
What next? The money they actually owe us – the taxes owed to the government by the Izmirlians/Baha Mar. Where are the pronouncements about paying the government the millions or likely, tens of millions, owed for hotel and casino taxes, government corporations, etc. So much talk, but no mention of the money owed to us, after being given half billion in assets by Perry Christie and the PLP – what audacity!
And, we should trust them?
We do not think so, the facts suggest, as we say “we have been swung” and we would add, in the worse possible way.
By: A Very Concerned CitizenBaha Mar, financial