Bahamas Resort Sues Chinese Contractor Over $3.5bn

The Baha Mar resort was once expected to add 12 per cent to Bahamas’s gross domestic product
Bahamas Resort Sues Chinese Contractor Over $3.5bn

A subsidiary of China State Construction Engineering, the world’s largest publicly traded contractor, has been dragged into a New York court on allegations it intentionally hampered the development of a $3.5bn luxury casino resort in the Bahamas.

The complaint brings head to head the son of an Armenian peanut magnate with one of China’s most powerful state-owned companies over a sprawling seaside hotel and casino complex near Nassau, the Bahamian capital.

With 2,200 rooms, private beaches and a golf course designed by Jack Nicklaus, the Baha Mar resort was once expected to add 12 per cent to the small island nation’s gross domestic product.

Instead, it filed for bankruptcy in 2015 after failing to open on schedule, a factor that led S&P Global to downgrade the sovereign rating of Bahamas. The project was eventually acquired by Hong Kong-based Chow Tai Fook Enterprise — the parent of a jewellery group that is bigger than Tiffany’s — and the resort launched in April this year under the new ownership.

But the dispute between the original developer and the Chinese contractor has raged on.

BML Properties, which started the development in 2005, alleges that Baha Mar contractor China Construction America intentionally delayed the development of the resort while charging BML hundreds of millions of dollars in fraudulent fees.

The complaint, filed to the Supreme Court of the State of New York, alleges a wide-ranging conspiracy to undermine the project, such as knowingly understaffing construction sites and using it as a training facility for new employees, resulting in persistent delays.

BML also claims CCA sought to sabotage aspects of the project and moved machinery and workers from the Baha Mar site to that of a competing project.

The developer is seeking $2.25bn in damages from the Chinese company.

BML is controlled by Sarkis Izmirlian, the son of an Armenian businessman with holdings in a Switzerland-based agricultural company specialising in peanut farming. Mr Izmirlian was awarded the project by the Bahamian government in 2005 but took on emergency investment from CCA and a $2.45bn loan from state-controlled Export-Import Bank of China following the global financial crisis.

Since the bankruptcy of the project in 2015, BML and CCA have clashed in other court battles, with BML seeking $192m in damages in the UK High Court in 2015.

Shanghai-listed CSCEC, with a market capitalisation of about $42bn, is one of the world’s largest construction companies. Earlier this year it invested in a Manhattan residential tower and is also building a stadium in North Carolina, Africa’s tallest building in Nairobi and social housing in Panama.

CCA did not respond to an emailed request for comment and representatives at its parent company in China could not be reached on the phone.

Source/Financial Times

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