Baha Mar To Close $2.5B Financing Agreement

Tuesday, 30 March 2010 00:00 News Editor
Bah Mar could finalise a $2.5 billion loan agreement with its Chinese partners for the Cable Beach redevelopment "within the next week", Tribune Business was told yesterday, with the developer also moving to conclude talks with Scotiabank on its original $170 million syndicated loan.

This newspaper was yesterday told by multiple sources close to the negotiations that the discussions between Baha Mar and its Chinese partner entities, the China Export-Import Bank and China State Construction, were continuing to progress. The developer was said to be "pretty close" to signing the loan agreement with China Ex-Im Bank.

"The negotiations are continuing, and it could happen in the next week; within a week or so," one source familiar with the situation told Tribune Business of the loan agreement.

Another added: "It's looking positive. They're going to be able to bring the deal to the Government in a short while." While the financing agreement represents a major step towards finally bringing the $2.6 billion Cable Beach redevelopment to fruition, other milestones need to be achieved before any ground breaking takes place - something that might be several months away still.

The China Ex-Im Bank's debt financing will need to be secured on assets at Cable Beach, namely the various parcels of real estate that make up the Baha Mar project, some of which are freehold and others leasehold. Attorneys are understood to be working feverishly to get all the relevant legal documents in place to secure this financing.

Then there is the need for all the relevant government approvals. That, too, may take some time, as the Ingraham administration will want to weigh up the agreement and its implications carefully.

Of special interest will be the Chinese partners' demands for anywhere between 5,000-8,000 work permits, given the thorny political issues this could create as a result of the Bahamas' current 15 per cent unemployment rate. But due to its importance to the Bahamian economy, the Baha Mar deal will likely to approved.

Formalisation of an agreement with the Chinese entities will also pave the way for Baha Mar to settle the outstanding loan with Scotiabank, which 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.

Tribune Business was yesterday told that there had been a "lot of to-ing and fro-ing" between Scotiabank and Baha Mar over the loan, with proposals and counter-proposals moving between the two parties, particularly the latter's principals, the Lyford Cay-based Izmirlian family.

Baha Mar's strategy appears to have been to conclude successful negotiations with the Chinese before turning its attention to the Scotiabank loan. This credit facility enabled the developer to acquire the existing Wyndham and Sheraton Nassau Beach resorts from Philip Ruffin and the Government, and is said to be secured on those hotels and associated real estate parcels.

The potential complication, Tribune Business was told yesterday, is that 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, but this, sources suggested, might not be possible if Baha Mar and Scotiabank do not resolve their loan situation.

This is unlikely to be a problem and 'deal-breaker', though, and some sort of resolution appears to be on the cards.

Tribune Business had been told that Baha Mar/the Izmirlians had offered to pay down $85 million or 50 per cent of the $170 million loan facility, and was subsequently informed that the developer had agreed to make the bank "whole" - indicating the entire loan would be repaid.

Scotiabank's head office personnel from Toronto are thought to have been in the Bahamas regularly in recent weeks, negotiating with Baha Mar and ensuring their loan's security is perfected.

From its own estimates, Baha Mar is expected to generate $740 million or 10 per cent of the Bahamas' per annum gross domestic product (GDP); some $880 million in spending and direct taxes into the economy during its first operational year; and $6.2 billion in government taxes over 25 years.

Some 8,500 full-time jobs would be created once Baha Mar began full operations, with the project bringing an extra 400,000 tourists to the Bahamas annually.

Source: The Tribune