Posted on: November 20, 2024, 09:00h.
Last updated on: November 20, 2024, 09:00h.
Three Chinese construction firms have pledged assets they own in The Bahamas as collateral as they seek a stay for an October court ruling that ordered them to pay $1.6 billion to the original developer of the Baha Mar integrated resort casino in Nassau.
CCA Construction, Inc., CCA Bahamas, Ltd., and CSCES Bahamas, Ltd., subsidiaries of Chinese Construction America (CCA), the United States-focused entity of the China State Construction Engineering Corporation, this week pledged two hotels in Nassau as collateral as they appeal the $1.6 billion verdict. The hotels were recently appraised by Cushman & Wakefield Inc. and Jones Lang LaSalle at between $232.7 million and $355.1 million.
CCA became involved with Baha Mar in 2014. The construction firms owned by the Chinese government were welcomed in as investors and developers of the resort after the 2008 financial crisis resulted in previous partners fleeing.
The deal, however, required that CCA be allowed to import Chinese nationals to construct the property, despite The Bahamas at the time experiencing an unemployment crisis, and that CCA could not be terminated or bought out from the undertaking for any reason.
The asset pledges follow an October decision from Manhattan Supreme Court Justice Andrew Borrok, who ordered the CCA companies to return BML Properties and its controlling stakeholder, Sarkis Izmirlian, who first envisioned the sprawling resort in 2005, the company’s $845 million original investment, plus interest and lost revenue dating back to May 2014.
Court Ruling
Borrok agreed with Izmirlian in his allegations that the CCA firms engaged in “massive fraud.” BML Properties argued in New York court that the Chinese agencies purposely delayed construction to miss three scheduled openings for the resort to put further financial strain on BML. Izmirlian’s company filed for bankruptcy in 2015.
China seized control of the unfinished resort and funded the resumption of construction through its Export-Import Bank of China. CCA ultimately sold the resort, then 97% complete, to Hong Kong-based Chow Tai Fook Enterprises, a privately held conglomerate with close ties to Beijing. No sale price was disclosed between the two closely connected entities. Chow Tai Fook opened Baha Mar in 2017 after spending $200 million to finish the development.
Chow Tai Fook Enterprises has a 10% position in the late Stanley Ho’s SJM Resorts, which owns and operates casino resorts in Macau. Chow Tai Fook also owns a casino in Vietnam and a 33% stake in Queen’s Wharf Brisbane in Australia.
Borrok sided with BML on its claims that the Chinese companies colluded to force The Bahamas-based company out. Baha Mar was conceptualized by Izmirlian and then-Bahamas Prime Minister Perry Christie to increase tourism to the island country, which had experienced a 20% decline in visitation during the previous decade.
Assets Unknown
The Chinese companies are appealing the Borrok ruling. In the meantime, they’ve asked Borrok to stay his $1.6 billion decision.
As security to stay enforcement of the judgment against Defendants, CCA would be willing to pledge its shares comprising 100% ownership interest in its subsidiaries that own two hotels in Nassau, Bahamas,” the filing read.
CCA did not name the two hotels it’s seeking to pledge as security for the appeal to proceed. However, the construction company owns The Pointe and British Colonial Nassau Hilton Hotel in The Bahamas.
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