Last updated: 11:36 AM ET, Tue November 03 2015

Izmirlian Blasts Baha Mar Receivership

Hotel & Resort | Brian Major | November 02, 2015

Izmirlian Blasts Baha Mar Receivership

Photo by Brian Major

It appears fair to say Baha Mar’s developer does not agree with last week’s move by Export Import Bank of China (CEXIM) to place the stalled $3.5 billion mega-resort project into receivership. In a statement issued Monday, Sarkis Izmirlian, chief executive officer of BMD Holdings and the project’s originator, called the development “disastrous.”

Last week’s appointment of Deloitte as receiver by CEXIM “continues the unfortunate pattern of disastrous actions taken by other stakeholders since Baha Mar has filed for Chapter 11,” said Izmirlian. The developer’s Chapter 11 filing was widely viewed as a late effort to retain control of the faltering project but was dismissed in September, leading to a “winding up” process overseen by the Bahamas Supreme Court and joint provisional liquidators.

Last week’s appointment of a receiver appears to place the resort’s fate in the hands of EXIM, its original financier. Izmirlian placed the blame for that outcome squarely on the mega-resort’s contractor and the Bahamas government.

“The facts are straightforward. China Construction America failed to meet its promises to complete the resort on the timetables it set, and failed to meet its financial obligations to Baha Mar, engaging in reckless and self-serving actions at the expense of the project,” said Izmirlian.

Furthermore, “The government of the Bahamas failed to meet its promises to Baha Mar, including making timely payments of monies it was obligated to pay Baha Mar,” he said.  “The result was a liquidity crunch last June that put Baha Mar at risk.”

While Izmirlian termed the failed Chapter 11 filing as a wasted opportunity, U.S. Bankruptcy Court Judge Kevin Carey called the filing “aspirational” because it relied in part on millions in additional financing for which Izmirlian did not identify a source.  

Nevertheless, the developer claimed that “Under Chapter 11, Baha Mar's assets would have been protected; we would have had the opportunity in a prudent manner to try to resolve the issues between the parties,” he said.

A successful Chapter 11 filing would also have included a plan to “pay all valid Bahamian claims in full,” along with “the salaries of the more than two thousand Baha Mar employees.”  Downsized employees would also have received severance under Chapter 11, he said.

“However, the government of the Bahamas, in concert with China Construction America and CEXIM, undertook a campaign that resulted in the Chapter 11 being dismissed,” which Izmirlian said “now leaves Baha Mar in the position where CEXIM bank is now the owner; most of its employees have been laid off; [there is] widespread collateral damage to hundreds of businesses; and its assets are being further impaired.” 

An Izmirlian spokesperson noted that Judge Carey also referred to the Capter 11 as a potential solution to the impasse. "Chapter 11, with all stakeholders participating, under these circumstances, would be an ideal vehicle for the restructuring of this family of related companies with the ultimate goal of finishing a project said to be 97 percent complete and, upon its exit from Chapter 11, to be in sound financial footing, with appropriate treatment of creditors," Carey said in his decision.

"I am consequently disappointed that the parties have been so far unable to formulate a consensual exit strategy, whether that would involve taking a plan to confirmation or providing for an agreed dismissal as part of a consensual resolution of their disputes,” he added.

Izmirlian said he has “continued to try to make proposals to achieve a consensual resolution of the issues that would enable Baha Mar to be properly completed and to open” but “unfortunately, the other stakeholders remain more focused on legal and political maneuvers than solutions.” 

He added, “[They] have moved Baha Mar further from completion and are now destroying any hope that Baha Mar, as originally conceived for the Bahamas, can become a reality.” 

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