NASSAU, Bahamas, Thursday July 23, 2015 – The Supreme Court has denied an application from Baha Mar Ltd. for its bankruptcy proceedings in the United States to be extended to the Bahamas, leaving the developer open to potential legal action by the company’s creditors.
The owners of the US$3.5 billion mega resort filed for Chapter 11 Bankruptcy protection in the US earlier this month, claiming US$2.7 billion in debt – including US$2.4 billion owed to state-owned Export-Import Bank of China – and arguing that the general contractor had repeatedly missed deadlines which left the company without a sufficient source of revenue to continue its existing business.
It then went to the Bahamas court, asking that those proceedings be recognized in the island.
However, Justice Ian Winder yesterday refused, which means the stalled project in the Bahamas will not receive the protection available in the US under the US bankruptcy code.
Recognition of the US proceedings would have also allowed owner Sarkis Izmirlian to retain control of the reorganization efforts and allowed the China Construction-built resort access to $80 million in fresh capital which he provided.
Baha Mar said in a statement issued after the ruling that it did not believe the ruling, for which the Bahamas strenuously argued, “assures the necessary protection of the assets of Baha Mar”.
“And we do not believe that it is best for the over 2,500 current employees of Baha Mar,” it added.
The Bahamas, on the other hand, welcomed the decision, saying it had vindicated the government’s position.
“Our government has argued firmly that a Bahamian court, supervising the work of an independent liquidator, is best suited to oversee the restructuring, completion and opening of the resort should Baha Mar, China Construction and Exim Bank be unable to reach an out of court agreement,” it said.
“Our objectives continue to be the prompt completion and successful opening of the Baha Mar project. We are confident [the] decision will encourage all parties to focus on these goals. It is a matter of the greatest national importance for the resort to open as soon as possible, under private ownership and operation . . . The best way to guarantee the jobs of Baha Mar employees is to achieve a timely negotiated agreement, and we urge all parties to do so.”
The Supreme Court’s decision sets the stage for a provisional liquidator to be appointed by the court on July 31, 2015, should no agreement be reached between the parties.