Four Things To Watch For In The Ongoing Baha Mar Battle
PHOTO: Sarkis Izmirlian. (Photo by Brian Major)
The $3.5 billion mega-resort planned for the Bahamas’ Cable Beach resort district is now nearly a year behind schedule with no opening date in sight. Yet recent developments could lead to a resolution in the high-stakes brouhaha, although likely not in time for the resort to launch during the crucial winter season.
Here are four things to watch for as the battle for the mega-resort’s future nears the one-year mark:
Court’s in session: Exactly when – and if - the 97 percent complete mega-resort will open now hinges on the outcome of court proceedings in the Bahamas, the United States and England. Last week the Bahamas Supreme Court appointed provisional liquidators to administer the stalled $3.5 billion mega-resort, but limited their purview to preventing depletion of the resort’s assets. Judge Ian Winder scheduled further proceedings for November 2.
Winder’s action effectively gives developer Baha Mar Ltd., headed by Sarkis Izmirlian, a temporary victory its campaign to retain control of the mega-resort.
“The ruling…provides Baha Mar with further time to resolve issues so it can complete construction properly and open successfully as soon as possible,” said Izmirlian in a statement. “The Bahamian Supreme Court has made it quite clear that the present intention is to not have Baha Mar liquidated or its management replaced.”
Baha Mar officials first turned to the courts in June, hoping to maintain control of the stalled mega-resort by filing for Chapter 11 protection Bankruptcy court in Wilmington, Del.
But presiding U.S. judge Kevin Carey last month said the bankruptcy case could end in a variety of ways, from a suspension of the case to allowing the case to continue if a Bahamian court approves Baha Mar Ltd’s bankruptcy plan.
Carey held off on making a ruling and urged Baha Mar Ltd. officials to resume talks with China State Construction Engineering Corporation Limited (CSCEC), the state-owned parent of China Construction America Inc. (CCA), whose subsidiary, CCA Bahamas, is the resort’s main contractor.
Baha Mar Ltd. has also filed a claim in the English High Court against CSCEC and CCA. “We look forward to working with the [Bahamas] provisional liquidator so they can conclude that we are taking all of the necessary steps to preserve the assets,” Izmirlian said, “while at the same time, developing the best, most efficient plan for moving forward.”
CCA Bahama, meanwhile, welcomes The Bahamian Supreme Court's ruling to appoint provisional liquidators, which marks an important step forward towards addressing the challenges relating to the completion and opening of the Baha Mar resort.
He said, she said: To date, the various parties do not seem reconciled to reaching an agreement. In fact, Baha Mar is seeking to remove its partners from the project: its Chapter 11 restructuring plan would cancel Baha Mar Ltd.’s contract with CSCEC and CCA, along with “all other claims,” leaving the current debt intact.
The plan also proposes securing of additional financing to complete the project, although Baha Mar Ltd. has to date been unable to secure any new funding. Baha Mar lawyers said Bahamian creditors would be paid in the “ordinary course of business” once the Chapter 11 reorganization plan was implemented.
A dismissal of Chapter 11 would prove “fatal” to the stalled project while an affirmative ruling and appointment of a mediator would bring the parties back to the negotiating table, the lawyers said. Baha Mar officials believe the Bahamas government would ultimately support a restructuring confirmed by the U.S. court.
CSCEC and CCA attorneys on the other hand requested Judge Carey dismiss the case because the U.S. court does not have jurisdiction in the Bahamas. They also allege Baha Mar Ltd. owes millions for already completed work, and point out that the Bahamas government urged the country’s Supreme Court not to recognize the U.S. Chapter 11 proceedings. The government would oppose a settlement that leaves Baha Mar in control, the CSCEC and CCA lawyers said.
Indeed, Bahamas Prime Minister Perry Christie’s office filed the Supreme Court “winding-up” petition with the aim of wresting control of the property from Baha Mar Ltd. Last week’s ruling by Winder seems to have at least temporarily stymied that effort.
CSCEC and CCA officials said in a statement that they “welcomed” the Bahamas Supreme court’s ruling. "We look forward to playing a constructive role in the process going forward and remain committed and fully prepared to re-mobilize quickly in order to complete the work at Baha Mar,” they said. “CCA Bahamas’ expertise and historical knowledge of the Baha Mar project is critical to successfully completing the resort and putting Bahamians back to work.”
They described Baha Mar Ltd. officials as “unwilling to reach an agreement which addressed the significant concerns of the principal stakeholders,” but added, “we stand ready, willing and able to work closely with any and all appropriate parties to expeditiously open this landmark resort.”
The color of the money: Baha Mar Ltd.’s Chapter 11 reorganization plan relies on financing that has yet to be obtained. Even Judge Carey called the Baha Mar plan “aspirational” during last week’s hearing. It remains to be seen if Izmirlian will be able to raise additional funds.
Meanwhile the costs continue to add up in the dispute, which effectively began over money. To date, Baha Mar Ltd. reportedly owes the government $58.845 million in unpaid taxes, fees and utility bills, with the Bahamas Electricity Corporation the largest creditor at $26.33 million. In addition, the Bahamas government has paid the salaries of up to 2,500 workers idled by the stalled opening.
Will the partnerships persist?: One of Baha Mar Ltd.’s four partner hotels has had enough of the continuing delays and is looking to jump ship. On the same day the government commenced its winding up petition, Rosewood Hotels filed a motion in the Delaware court to terminate its license with Baha Mar Ltd.
Rosewood alleged in court documents that bankrupt Baha Mar Ltd. failed to pay the rank and file employees and senior executives at the hotel, and failed to reimburse Rosewood for various fees and expenses. The developer also failed to reveal it does not own the land on which the resort is built.
“Baha Mar has told Rosewood that it does not in fact own the land, and, a preliminary search performed on August 14 of The Bahamas Registry of Records reflected that Baha Mar did not own any real property when it entered into the Rosewood hotel agreements and still does not,” said the firm’s lawyers in the court filings. “Therefore, Baha Mar has incurably defaulted under the license agreement and the hotel management agreement.”
It remains unclear if the other partners will seek to exit Baha Mar. In addition to the resort’s flagship, a 1,000-room Baha Mar-branded Casino Resort & Hotel, the property also includes a 707-room Grand Hyatt, a 300-room SLS Lux, and the 694-room Meliá, the property’s only pre-existing hotel. Morgans Hotel Group last year pulled its Mondrian brand from the project. The hotel was replaced by the SLS Lux-branded property.
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