Last updated: 10:38 AM ET, Thu July 30 2015

Baha Mar Developers File Suit Against General Contractor

Hotel & Resort | Brian Major | June 30, 2015

Baha Mar Developers File Suit Against General Contractor

One day after filing for bankruptcy in the U.S., the developers of the $3.5 billion Baha Mar mega-resort brought their effort to salvage the oft-delayed project to another nation’s courts. Baha Mar Ltd. filed a claim Tuesday in Britain’s English High Court against the project’s contractor, China State Construction Engineering Corporation Ltd., parent of China Construction America Inc. (CCA).

The claim asserts CCA “is liable in respect guarantee and performance obligations related to the construction of the project, and that Baha Mar Ltd. is entitled to and claims against the defendant a variety of financial remedies” Baha Mar representatives said Tuesday in a statement.

In a sense, the most recent court filing follows a pattern. In Monday’s bankruptcy announcement Sarkis Izmirlian, Baha Mar’s CEO, focused blame for the project’s repeated delays squarely on CCA.

“The general contractor repeatedly has missed construction deadlines,” Izmirlian said in the statement. “This has caused both sizeable delay costs and forced the resort to postpone its opening,” he said. “The resort has been left without a sufficient source of revenue to continue our existing business. “

The delays will ultimately impact the 2,000 workers the company had hired in anticipation of a December 2014 launch, he added. “If we cannot reach a consensual resolution in the next few weeks, we will have to make some extremely difficult decisions that would include workforce reductions,” Izmirlian said.

In what may prove an important step to facilitate an opening of the resort through the bankruptcy process, Izmirlian said he would arrange an $80 million funding facility under which the resort would operate while in bankruptcy.

“This financing will enable Baha Mar to operate and meet its financial obligations in the interim during the Chapter 11 process,” he said. Up to $30 million of the funding “will be utilized by Baha Mar over the next 30 days,” Izmirlian added.  

The Baha Mar chief acknowledged the Bahamas government’s efforts to repair the rift between the developers and CCA. “I want to thank the government of the Bahamas and the prime minister in particular for their efforts on behalf of Baha Mar and deeply appreciate their support,” Izmirlian said Monday. “They, like us, want Baha Mar to succeed.”

Indeed, while an array of issues — from inadequate government support to labor troubles to the high cost of electrical power — have been blamed for the project’s delays, Izmirlian’s statements indicate the primary dispute is tied to alleged CCA work slow-downs that delayed the mega-resort’s construction.

In effect, the fracas directly involves the Chinese government. Bahamas media reports linked the stalled work to delayed or inadequate payments made to CCA, China’s state-run construction firm.

China’s Import-Export Bank financed the Baha Mar project through a $2.5-billion loan, while Izmirlian’s firm arranged the additional $850 million to bankroll the project. China’s ambassador to the Bahamas was reported to be involved in negotiations earlier this month.

“The people of The Bahamas should no longer have to endure embarrassing delays of Baha Mar’s opening,” Izmirlian said. “Nor should members of the travel industry and guests continue to face understandable frustration and disappointment caused by the failure to complete construction. I am committed to doing all I realistically can to move Baha Mar forward to be completed and opened successfully.”

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