Baha Mar, a crusade and a dream, or just another nightmare in paradise?

3 August 2015

Baha Mar Logo

What is Baha Mar?

Baha Mar is a resort currently under construction on the island of New Providence in the Bahamas. Planned amenities at the resort include four hotels; the Baha Mar Casino and Hotel, the Grand Hyatt at Baha Mar, the SLS Lux, and the Rosewood at Baha Mar.

Overall the resort when completed will contain 2,200 rooms, 284 private residences, a 100,000 square-foot casino, a 30,000 square-foot spa, over 30 food and beverage options, luxury shopping, art galleries, and studios, a waterpark, and the TPC at Baha Mar golf course designed by golfing legend Jack Nicklaus.

The resort is owned by Baha Mar Resorts Limited and is managed by Chairman and Chief Executive Officer (CEO) Sarkis Izmirlian. The Izmirlian family as discussed below are significant investors in the project.

The main players at Baha Mar – enter stage left

There are four main players in the Baha Mar project.

  1. The Izmirlian family who have invested close to US$1 billion in the project
  2. The China Export-Import Bank who have provided financing to the tune of US$2.45 billion
  3. The state controlled China State Construction Engineering Corporation who acts as general contractor through its subsidiary China Construction America
  4. The Bahamian Government and by extension the people of the Bahamas

Why the project at Baha Mar is important for EVERYONE on the stage











At an estimated cost of $3.5 billion the Baha Mar resort is by far the largest hospitality project ever attempted in the Caribbean.

The project was expected to revive tourism and the national economy of the Bahamas.

It’s significance to the economy of the Bahamas is so great that it is when operational it is expected to create a double digit boost to the country’s gross domestic product (GDP), while at the same time creating over 5,000 new jobs in an economy that remains largely dependent upon tourism and suffering high levels of unemployment (unemployment levels in the Island currently exceed over 10%).

If Baha Mar succeeds it could turn the Bahamas into a major gaming destination that would rival both Las Vegas and Atlantic City.

For China (who provide finance and construction services) the project is of huge significance since it will help China extend its economic and political influence in the Caribbean and Latin America, an agenda that Beijing is keen to achieve.

For the Baha Mar Chairman and CEO, completion of the project has been something of a personal crusade. The Izmirlian family have for over a decade tried to develop the 1,000 acre parcel of land along Nassau’s renowned Cable Beach. Izmirlian has resided in Bahamas for a number of years and his family, who made their fortune in peanuts, have committed close to US$1 billion into the Baha Mar project.

Trouble in Paradise?









The Board of Baha Mar have in recent times publicly complained about significant delays in the construction process, and the quality of the work performed by the contractor to date.

Delays and poor workmanship have, according to the Board of Baha Mar, led to the cancellation of proposed openings in December 2014 and March 2015, and resulted in significant cash losses for the project. Baha Mar also claims that the China Ex-Im Bank has refused to disburse the remainder of the loan it agreed to advance to finance the project.

The contractor has countered that Baha Mar owes $140 million in arrears for work already performed and blames problems with the project on inadequate financing and poor design.

As a result of this impasse, late last month Baha Mar filed for Chapter 11 bankruptcy protection in the courts of Delaware in the United States, claiming that it hired over 2,000 workers for the planned March 2015 opening, and it has no income to pay them because the resort has not been completed by the contractor in time for the second proposed opening.

Accordingly the Baha Mar Board has “determined that due to the financial consequences of the repeated delays by the general contractor, and the resulting loss of revenue, the chapter 11 process is the best path to provide the time to put in place a viable capital structure and working relationships to complete construction and successfully open the Baha Mar.”

Is the Chinese way necessarily the best way for the Caribbean?

Although talks between all the interested parties continue, and at some point in the near future all the issues between the parties will be resolved and the complex at Baha Mar will be completed, there are obvious lessons to be learnt for the rest of the business communities in the Caribbean, and particularly for those like Antigua where a similar type resort project has been proposed with a similar Chinese involvement.

The lessons are simple ones.

First putting all your eggs into one basket, and betting on Beijing might not result in the end outcome you initially expected.

Second the Chinese intention is clear. Irrespective of what happens to the Baha Mar project, they are coming to the Caribbean in a big way.

It should have been simple shouldn’t it?

If you take a look at the Baha Mar website which can be found at you will find the following statement from the Board of Baha Mar.

“We are committed to doing all we realistically can to move Baha Mar forward to be completed and opened successfully. We are confident that once opened, Baha Mar will be a world-class destination resort that will attract guests from around the world and serve as a key economic sparkplug in The Bahamas.”

It really should have been that simple shouldn’t it?

The impact on Bonds in the Bahamas Region

Except for Bahamas bonds which took an initial nose dive when Baha Mar declared bankruptcy in Delaware, the regional bonds have not been affected by this Bahamas issue.  However, it would not be a surprise that tourism/resort development in the region will take a hit from foreign investors.  Bahamas has four (4) bond issues outstanding (2024, 2029, 2033 and 2038) and the country is investment grade (BBB by S&P).  However, a negative watch can send it to below investment grade and with the headline risk we are not recommending Bahamas bonds at this time.

Puerto Rico seems to be heading for a default as the country issued too much debt over the years (PR Municipals are tax-free in the USA so they were very popular) and now with no growth in the economy, the island is seeking US Congress to pass a law to permit them to issue a Chapter 9 bankruptcy.

The Bermuda 2024 yielding 4% presently with an investment grade (A+ by S&P) is a good buy.

Dominican Republic economy is improving but investors should stay with the shorter issues (yielding in the range of 9%) if you can tolerate heavy price fluctuations as these bonds trade often.


Closing thoughts – ready to make some investments?

Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector and Fixed Income Securities in the Caribbean and Central America. Firstline offers a number of unique opportunities to put surplus cash to work either as your asset manager or investment advisor. See our picks for today, the highlighted bonds at the following link:

Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.


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