End to Impasse In Sight Following Baha Mar Chapter 11 Dismissal
The U.S. bankruptcy court in Delaware dismissed Baha Mar Ltd.’s Chapter 11 filing late Tuesday, signaling what may be the end of Baha Mar Ltd. chief Sarkis Izmirlian’s near decade-long effort to build and operate the $3.5 billion Nassau, Bahamas mega-resort.
Judge Kevin Carey ruled in favor of motions by the project’s contractor, China Construction America (CCA), and its financier, the China Export-Import Bank (CEXIM), dismissing the majority of the Chapter 11 proceedings. With the exception of Northshore Mainland Services, one of Baha Mar’s 15 related entities, all of the cases were dismissed.
The ruling effectively ends Izmirlian’s effort to operate Baha Mar under Chapter 11 protection while his company worked to finish construction of the mega-resort, which is 97 percent complete.
Izmirlian had filed for bankruptcy in June, launching a war of words among Baha Mar officials, CCA and the Bahamas government, which saw the U.S. filing as an affront to the country’s sovereignty. With Tuesday’s ruling, the Bahamas courts gain control over the impasse’s outcome.
In his ruling, Carey said continuing the Chapter 11 was unlikely to compel Baha Mar, its Chinese partners and the Bahamas government to return to negotiations aimed at opening the stalled mega-resort, now eight months beyond its original opening date.
Carey also agreed Baha Mar’s creditors had “a legitimate expectation” that any insolvency proceedings involving the mega-resort should take place in the Bahamas.
PHOTO: A nighttime view of the entrance to the still-in-limbo Baha Mar resort. (via Baha Mar/Facebook)
Earlier this month the Bahamas Supreme Court named provisional liquidators to protect the resort’s assets through November 2, when the Court is scheduled to rule on the “winding down” petition that will determine the development’s fate.
Carey’s ruling effectively gives Baha Mar Ltd., CCA and the Bahamas government two months to forge an agreement that will allow the resort to open. Looming in the background is CEXIM, which financed the development through a $2.5 billion loan.
“Baha Mar will explore its alternatives with respect to today’s Court decision,” said the developer’s executives in a statement.
“Our priority continues to be ensuring Baha Mar is in a position to be completed properly and opened successfully as soon as possible,” they added. “We are continuing to do all we realistically can, including working with the provisional liquidators appointed by the Bahamian Supreme Court, to try to resolve the issues that have prevented Baha Mar from opening.”
Officials at CCA welcomed Carey’s ruling. In a statement, they said CCA “support(s) the Court’s decision that issues concerning Baha Mar are best resolved within the Bahamas.” CCA will work with the provisional liquidators named by the Bahamas Supreme Court and “stand ready, willing and able to re-mobilize the appropriate resources to complete the Baha Mar resort as soon as possible,” the statement adds.
What remains unclear is whether Izmirlian and CCA, with the Bahamas government’s assistance, can forge an agreement by November. Izmirlian has consistently sought to remove CCA as the resort’s contractor, saying the contractor’s repeated delays led to missed opening dates. CCA officials in turn say Izmirlian and Baha Mar Ltd. have failed to make payments for completed work.
Some Bahamas observers have suggested Izmirlian has lost leverage with the end of the Chapter 11 bid because CCA and CEXIM can now offer Baha Mar Ltd. a take-or-leave-it deal or simply assume control of the unfinished mega-resort. As the project’s primary financier, CEXIM, like CCA a Chinese state-owned entity, would be in the driver’s seat.
Still others point out that ousting Baha Mar Ltd. would be far from simple task. Izmirlian himself has maintained that severing the Baha Mar ownership and management team would lead hotel companies and other partners to end agreements tied to the resort’s operation. Any new owner/operator would be forced to start over, which might take months or even years.
Observers also expect Izmirlian to launch a new round of legal battles in Bahamas, U.S. and/or U.K. courts should his company be axed from the project. The resulting imbroglio could deter potential buyers from acquiring Baha Mar.
For its part, the Bahamas government, which views Baha Mar as crucial to its economic future, is hoping for a resolution that can finally see the mega-resort open. “[Our] primary objective is and has always been to see the Resort completed, opened and operating as soon as possible,” said officials.
They added, “The government therefore invites all parties to join it in cooperating with the provisional liquidators to bring about a prompt resolution of this matter in the interests of the Bahamian people.”
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