Baha Mar Construction To Start 'Before Year End'

BAHA Mar yesterday expressed hope the Bahamian government would provide the necessary approvals "as expeditiously as possible" to allow construction on the $2.6 billion Cable Beach redevelopment to begin later this year, as it continues negotiations with Scotiabank over the latter's $170-$180 million bridging loan.

Robert Sands, Baha Mar's senior vice-president of governmental and external affairs, told Tribune Business that once all necessary approvals were received from the Bahamian government, the developer would "immediately award" six construction contracts to separate Bahamian contractors for building the Commercial Village, plus the re-routing of West Bay Street and its interconnection with JFK Drive.

Speaking in the wake of confirmation that the Chinese government had approved the involvement of the China Export-Import Bank and China State Construction as Baha Mar's financing and equity/project manager partners respectively, Mr Sands said the developer felt it had submitted everything necessary to the Ingraham administration, and had also reached a "different arrangement" with the Government for building the Cecil Wallace-Whitfield Building's replacement.

Under the current terms, while Baha Mar would provide the land and finance the project, the Government would hire its own contractor and determine the timing of the new building's construction. Baha Mar is paying the Government $17-$18 million to acquire the existing Cecil Wallace-Whitfield Building.

"We are hopeful that the Government approval process moves as quickly as possible to allow is to begin construction during the latter part of this year," Mr Sands told Tribune Business. "We have not received a timeline as yet. We are hopeful it will be done as expeditiously as possible by the Government of the Bahamas.

"What it means is that once our project is approved by the Government of the Bahamas, we will immediately award those six contracts to Bahamian contractors, representing over $60 million in construction awards."

Those projects have been projected to create at least 200 construction industry jobs, and apart from the road re-routing also involve a new fire and police station, plus new bank branches for Scotiabank, Commonwealth Bank and Fidelity Bank (Bahamas), and a new Straw Market.

Explaining that the Cecil Wallace-Whitfield building's replacement would not be part of the $60 million worth of work, Mr Sands said: "We've entered into different arrangements with the Government of the Bahamas on that particular point. The Government will be responsible for rebuilding that.

"We've come to an agreed value and are providing the land. They will contract the contractor for that building."

With approval from the Chinese government seemingly in hand, Baha Mar and the Ingraham administration can now focus on working through this nation's approval process, and the 49 conditions precedent the developer must fulfill to consummate its project.

Another key will be resolving the $170-$180 million bridging loan provided by the Scotiabank-led syndicate, which financed Baha Mar's purchase of the existing Cable Beach resorts back in 2005. Tribune Business sources indicated that Scotiabank feels the situation is at an "impasse", the bank having few attractive options at this point.

If it moved to foreclose, it would be left running several loss-making resorts and with little prospect of recovering the loan's full value. A debt-for-equity swap, where the Scotiabank syndicate took an ownership stake in the Baha Mar project, would also not be attractive to a conservative lender, since it would effectively have to write-down the value of that $170-$180 million loan.

It is likely that Baha Mar and its principals, the Izmirlian family, will not settle the Scotiabank situation until all required approvals from the Bahamian and Chinese governments are in hand, Tribune Business has been made to understand.

Resolution of the situation is important, though, because part of the collateral for the Scotiabank loan is real estate upon which the $2.5 billion financing from the China Export-Import Bank will be secured upon.

Mr Sands said yesterday: "We have been working very hard and collaboratively with our partners in Scotiabank. They know the Bahamian economy very well due to the important business they conduct here, and they certainly understand the positive impact our project will have on it.

"We are in very active negotiations to finalise the terms of the bridge financing they have provided, and we expect to reach a resolution on this in the very near term."

Pointing to the estimated $1 billion impact to Bahamian gross domestic product (GDP) that the Baha Mar project would have during its first full year in operation, plus the almost 11,000 jobs - including 7,000 direct ones - that would be created, Mr Sands said the Cable Beach redevelopment held "huge economic benefits for the Bahamas and the Bahamian people".

He added that the project "could not have come at a better time as the economy begins to recover. This will certainly aid the economy as it starts that process".