It was the biggest project in the Bahamas and was meant to secure the reputation of a Chinese contractor hoping to expand in the US, but this week the $3.5bn Baha Mar casino and resort scheme was hit by bankruptcy and a claim in a London court.
After months of construction delays and bitter accusations Baha Mar Ltd, the developer of the Chinese-funded mega project, on Monday (29 June) filed for Chapter 11 bankruptcy protection in a court in Delaware, US.
The following day the company commenced a claim in the English High Court in London against China State Construction Engineering Corporation Limited (CSCEC), the state-owned parent of China Construction America Inc. (CCA), whose Bahamian subsidiary is main contractor on the beleaguered project.
The people of The Bahamas should no longer have to endure the adverse effects of the general contractor not fulfilling assurances regarding the completion of Baha Mar’s construction– Baha Mar chairman and chief executive, Sarkis Izmirlian
Baha Mar blamed the contractor for its financial difficulties. It said CCA repeatedly missed construction deadlines, delaying the hotel’s opening.
In its English High Court claim Baha Mar asserts that CSCEC is liable for guarantee and performance obligations related to the project, and that Baha Mar is entitled to "a variety of financial remedies".Â
Opening pushed back
The Baha Mar scheme includes four luxury hotels with a total of 2,000 rooms, a vast casino, more than 50 restaurants, 200,000 square feet of convention space and its own 18-hole golf course.
It was originally supposed to open in December 2014, but the date was pushed back to March this year. In May the Baha Mar website was not taking bookings before September 2015, and there is currently no online reservation facility for the resort on its site.
In 2010 the state-controlled China Export-Import Bank (Exim) lent the project $2.4bn of the estimated $3.5bn total cost. CSCEC is reported to have taken a $150m equity stake, while Baha Mar Ltd. invested $850m. CCA was picked as the main contractor and construction began in February 2011.
It was the biggest project ever undertaken by CCA, which has expressed ambitions to be a top-10 contractor in the US.
However, problems with delays and alleged late payments began to emerge last year.Â
In May Baha Mar appealed directly to the China Exim Bank to get the project moving.
Earlier, local media reported CCA as having said it slowed work down in response to the developer not paying.
In filing for bankruptcy protection, Baha Mar said it is confident Baha Mar will be built, but that it needed to start Chapter 11 proceedings to protect its interests.Â
Baha Mar chairman and chief executive, Sarkis Izmirlian, will seek Debtor-in-Possession (DIP) financing to enable Baha Mar to operate during the Chapter 11 process. In a statement the company said the total DIP facility is up to $80m, of which up to $30m "will be utilized by Baha Mar over the next 30 days".
Izmirlian blamed CCA for the company’s troubles, stating that Baha Mar had hired and trained 2,000 staff on the promise of a March 2015 opening. He said a negotiated resolution is still possible, but that CCA had let Bahamians down.
"The people of The Bahamas should no longer have to endure the adverse effects of the general contractor not fulfilling assurances regarding the completion of Baha Mar’s construction, forcing in turn embarrassing delays of Baha Mar’s opening," he said. "Nor should members of the travel industry and guests continue to face understandable frustration and disappointment caused by the failure to complete construction. All of this now stops with and can be remedied through the Chapter 11 process."
Image: The Baha Mar scheme includes four luxury hotels with a total of 2,000 rooms, a vast casino, more than 50 restaurants (Bahamar.com)