International Business

Chinese firm faults developer over Baha Mar

Chinese workers are shown during Baha Mar construction in 2014. The Chinese general contractor for the massive resort project blamed the developer for construction delays.
Chinese workers are shown during Baha Mar construction in 2014. The Chinese general contractor for the massive resort project blamed the developer for construction delays. For the Miami Herald

The Chinese construction company that is the general contractor for the huge Bahamian resort complex Baha Mar said Tuesday that delays in the project resulted from mismanagement by the developer, including 1,300 construction change orders and replacing the principal architect after construction had already begun.

In filing for Chapter 11 bankruptcy protection in Delaware last week, Baha Mar Ltd. — the developer of the resort being built along Nassau’s Cable Beach — said that repeated delays by the contractor, CCA Bahamas, and resulting loss of revenue because of missed deadlines for opening the resort had led to its bankruptcy decision.

Built largely with Chinese labor and financing, Baha Mar was initially supposed to open in December 2014. But the resort, which includes a casino, four new hotels and an 18-hole golf course, has missed several announced opening dates since then.

“Baha Mar Ltd.’s decision to file for bankruptcy protection is the direct result of its failure to secure adequate financing and its mismanagement of the design of Baha Mar resort project,” said CCA Bahamas in its first statement on the bankruptcy. In addition to the change orders and the new architect, CCA Bahamas said the developer was responsible for “late and incomplete delivery of design packages.”

CCA Bahamas is a subsidiary of China Construction America, the North American and South American subsidiary of China State Construction Engineering Corp. The parent company is listed on the Shanghai Stock Exchange and has a market capitalization of $48 billion.

The developer’s “recent public attempt to shift responsibility away from itself and blame CCA Bahamas and our subcontractors for the delays in the project’s completion is misleading and dishonest,” the general contractor said. “It is insulting to the many talented and hardworking employees and subcontractors that work for CCA Bahamas and harms the interests of the people and government of the Bahamas that are represented by this landmark project.”

CCA Bahamas also said it and its subcontractors are owed nearly $72 million for work that has been completed.

Although there were some Bahamian subcontractors on the project, the $3.5-billion-plus resort has been built largely with the help of 4,100 Chinese laborers and $2.4 billion in financing from the Export-Import Bank of China.

CCA Bahamas also questioned the decision by Baha Mar Ltd. and 14 affiliated companies to file for bankruptcy in the United States, calling it “misplaced and calculated” since “the vast majority of the Baha Mar debtors are organized under the laws of the Bahamas, the Baha Mar project is located in the Bahamas, and the Bahamian people are deeply invested in the future of the project.”

Baha Mar Ltd. also filed a claim against China State Construction in London’s English High Court last week in which it asserts the Chinese company is liable for guarantee and performance obligations related to construction of the resort and that Baha Mar Ltd. is entitled to various financial remedies.

The developer said Tuesday that both its litigation and bankruptcy filings “all speak to the failed construction performance of the general contractor and the resulting disturbing consequences. We therefore are not going to comment on CCA's press release attempt at damage control.”

A hearing was scheduled Tuesday before the Bahamian Supreme Court on Baha Mar Ltd.’s application to have the U.S. bankruptcy proceedings recognized in the Bahamas but it was postponed until July 20.

The adjournment was requested by Baha Mar and agreed to by the Export-Import Bank of China and the Office of the Attorney General. In the meantime, the developer said it looked forward to negotiations with all parties to try to resolve the impasse.

Baha Mar had said that a delay caused by the Supreme Court’s adjournment last Thursday before acting on the matter had made it impossible to pay 2,400 resort employees and to pay suppliers and vendors. Among other things, the U.S. court had approved Baha Mar’s request to fund its payroll.

The Bahamian government told Baha Mar last week that if it or the China Export Import bank was unwilling or unable to pay the workers, the government would step in and pay them while negotiations continue. But Prime Minister Perry Christie emphasized that the workers are in their present predicament because of Baha Mar Ltd.’s “unilateral decision to go into Chapter 11 proceedings in a foreign country.”

The Office of the Attorney General released a statement saying: “The government feels very strongly that resolution of the disputes that have delayed the project should occur in the Bahamas, subject to adjudication by Bahamian courts, consistent with the sovereignty of The Bahamas.”

Christie said the government supported the adjournment but with the condition “that all parties reconvene negotiations on an urgent basis and develop a way forward that would see construction resume immediately.”

It has always been in the best interest of all involved to negotiate a solution outside of the courts, which is what the government has been supporting over the last several weeks,” he said.

The prime minister said China State Construction and the China Export-Import Bank have agreed to participate in mediated negotiations next weekend and he is waiting to hear from Baha Mar.