Bahamian Government Blocks Resort Developer's U.S. Bankruptcy
The resolution of a stalled, nearly complete Bahamas resort project has become more complicated.
A Bahamian judge’s July 22nd announcement that the island nation will not recognize the U.S. bankruptcy filing of a local developer building the $3.5-billion, Baha Mar resort is injecting further uncertainty, including for project contractors. The ruling marks the latest twist in an 11th-hour legal standoff between the developer and contractor that began June 29, when subsidiaries of Baha Mar Ltd. filed for protection from creditors via the Chapter 11 bankruptcy laws.
In its filings, the Baha Mar group blamed the contractor, a subsidiary of China Construction America (CCA), for the halted project’s delayed completion and financing issues. The contractor, meanwhile, asserted that the firm and its subcontractors have performed $72 million worth of work since last being paid, in February.
Baha Mar hired CCA as general contractor after it secured the majority of the project’s financing from the Export-Import Bank of China, which provided the developer with a $2.45-billion secured-debt facility, according to records. The contractor, meanwhile, provided a $150-million preferred-equity commitment.
Construction, which began in early 2011, was originally scheduled to end by late 2014. Both parties estimate the project to be 97% complete.
If granted, the Bahamian government’s filing for a “winding-up petition”—aimed at taking control of the Baha Mar bankruptcy—may increase uncertainty for project contractors as they hustle to understand the process.
Prime Minister Perry Christie described the Bahamas’ bankruptcy laws as similar to Chapter 11, but noted that provisional liquidators control the process, with their aim being “to expedite the resolution of the matter and to prepare a plan for the restructuring of Baha Mar, that will result in the earliest possible completion.”
The court is scheduled to appoint a provisional liquidator on July 31.
In response to the ruling, Baha Mar Ltd. stated: “We do not believe today’s ruling, for which the government strenuously argued,
assures the necessary protection of the assets of Baha Mar.”
In a July 22 statement, the government of the Bahamas noted, “It is a matter of the greatest national importance for the resort to open as soon as possible, under private ownership and operation.”
Meanwhile, representatives of both parties indicated that all-party discussions with the China Ex-Im Bank were ongoing. The Bahamas Tribune had earlier reported that one proposal floated during discussions called for the China Ex-Im Bank to provide the developer with financing to complete the project, plus $100 million in operating capital, with the requirement that Baha Mar Ltd. CEO Sarkis Izmirlian agree to a personal guarantee.
Previously touted as as “the largest single-phase resort project in the Western Hemisphere,” the 3.3-million-sq-ft development
includes four hotels of between 11 and 28 stories, an approximately 100,000-sq-ft casino, and a roughly 200,000-sq-ft convention center.