Baha Mar Gets Loan On 49 Conditions

Baha Mar has 49 "conditions precedent" that it must fulfill to consummate its $2.6 billion Cable Beach redevelopment, the Prime Minister confirmed to Tribune Business, the most important being to resolve negotiations with Scotiabank over its outstanding $170-$180 million loan.

Mr Ingraham confirmed the number of conditions still to be fulfilled by the resort developer, Tribune Business having been told this number by one of its contacts, with the Government awaiting approval of the project by the Chinese government before it starts to move on its own process.

"There are 49 conditions precedent, the most important of which is the Scotiabank loan," Mr Ingraham confirmed to Tribune Business. "Notwithstanding this, the Chinese government has to approve the project, and that has not happened yet.

"Once that happens, all those conditions precedent can be worked through. The Government of the Bahamas is waiting for confirmation that the government of China has approved the deal with Baha Mar, the China Export-Import Bank and China State Construction."

With such a lengthy 'to do' list on Baha Mar's part, the Government's relative silence on the project is understandable, with the Prime Minister seeking to manage public expectations and not get hopes up before the deal is finally signed, sealed and delivered.

It seems likely that there will be no 'ground breaking' on Baha Mar in the immediate future, even though many conditions are likely to be relatively easy to meet and were probably in the previous deal with Harrah's.

Baha Mar, though, has gone out to tender on the $200 million Commercial Village work, a project set to create 320 construction jobs.

Robert Sands, Baha Mar's senior vice-president of external and governmental affairs, told Tribune Business yesterday that discussions between Scotiabank and the developer were ongoing, although he declined to provide details.

"We continue to have discussions with them," Mr Sands said of Scotiabank. "The discussions are continuing. We are satisfied the Baha Mar project will go forward. This is an intricate and large project, and the two important elements of this are receiving the approval of the Government of the Bahamas and the government of China.

"We are satisfied the project will go ahead, and we are waiting to hear from the governments."

However, sources close to the situation told Tribune Business that Baha Mar and Scotiabank were making "good progress" in resolving the situation regarding the outstanding $170-$180 million syndicated loan, which was issued to finance the acquisition of the existing Cable Beach Resorts from Philip Ruffin.

As revealed by this newspaper previously, Baha Mar needs to successfully resolve the situation over the Scotiabank loan, as it is said to be secured on the existing Sheraton Cable Beach, Wyndham Nassau and Crystal Palace Casino and associated real estate parcels at Cable Beach.

The potential complication is that this real estate also includes parcels upon which China Ex-Im Bank will take security for its $2.5 billion loan.

The Chinese bank will need those assets delivered 'free of encumberances', to quote legal parlance, which is why Baha Mar and Scotiabank need to resolve their loan situation.

Scotiabank has already extended the due date twice - from December 31, 2009, to end-January 2010, and then to March 31, 2010 - to give the developer time to seal the deal with Beijing. That was concluded on March 30, 2010, and possibly explains Baha Mar's haste to seal the deal with the China Export-Import Bank and China State Construction by that date.

Tribune Business has been told that if the talks do not bear fruit, Scotiabank could potentially foreclose on the two existing resorts at Cable Beach.

However, this is unlikely to happen, given that the bank would inherit and take over two loss-making resorts, thereby increasing its Cable Beach exposure. It is also unlikely to be able to find a buyer for them for much more than $100 million, meaning it would be unable to recover the full value of its loan.

Some sources have expressed surprise to Tribune Business that Scotiabank's loan collateral does not include the golf course at Cable Beach, a key cash flow generator for the resorts.

Some have suggested that the likeliest solution to the impasse would be for Scotiabank to take an equity stake in the Baha Mar project.

Tribune Business also previously reported how Baha Mar and its principals, the Lyford Cay-based Izmirlian family, had offered to make Scotiabank "whole" and repay the entire loan, having previously offered to pay down $85 million or 50 per cent during proposals that were swapped between the two sides.

Meanwhile, Mr Ingraham confirmed that Kerzner International had obtained all the necessary permits for its $100 million Paradise Island upgrades, a project expected to create 400 permanent jobs over a three-year period.

"They're going to do major renovations to the existing projects," the Prime Minister confirmed. "He's [Kerzner] sought and obtained approvals from the Investment Board."

Source: The Tribune