The Chinese bank and the Chinese contractor behind the Caribbean’s biggest leisure development, Baha Mar in the Bahamas, have successfully thwarted the resort’s developer in its attempt to seek bankruptcy protection in the US.
Yesterday’s ruling by a US Bankruptcy Court in Delaware means the developer, Baha Mar Ltd, now has little protection against liquidation proceedings initiated by the Bahamian government after Baha Mar Ltd made the surprise move of seeking protection in the US on 29 June.
Work on the $3.5bn Baha Mar resort scheme, claimed to be 97% complete, stalled after a missed opening deadline of 27 March, with the developer claiming contractor delays and poor workmanship, countered by the contractor’s claims of non-payment and mismanagement.
I can perceive no greater good to be accomplished by exercising jurisdiction over these Chapter 11 cases– Judge Kevin Carey
Welcoming yesterday’s decision by Judge Kevin Carey, the contractor, China Construction America Bahamas Ltd (CCA Bahamas), said the case should be dealt with in the Bahamas, not the US.
"This decision protects the interests of all principal stakeholders and provides greatest certainty to the future of the Baha Mar Resort," the contractor said in a statement.
Baha Mar Ltd said it was disappointed with the ruling, but added that the court had affirmed the appropriateness of its filing for protection under Chapter 11 of the US Bankruptcy Code.
The developer will now "explore its alternatives", it said in a statement yesterday.
The project broke ground in 2011 with $2.45bn in financing from the Export-Import Bank of China, $150m from state-owned China State Construction Engineering Corp, the parent of CCA Bahamas, and $900m from the wealthy Izmirlian family, which controls Baha Mar Ltd.
CCA Bahamas became the contractor and construction manager for the scheme, billed as the largest single-phase leisure project in Caribbean history.
Originally set to open in December 2014, the project missed a second deadline in March and stalled amid complex litigation and mounting public recriminations.
In July Baha Mar Ltd’s chairman and chief executive Sarkis Izmirlian tried to eject CCA Bahamas from the scheme by appealing directly to the Chinese bank to provide half the $400m needed to finish the resort. He proposed bringing in other contractors.
The bank did not respond. Instead, it filed a motion in the Delaware court to have Baha Mar’s bankruptcy case dismissed, joining CCA, whose lawyers had already done so.
Baha Mar Ltd filed for protection in the US because it would have allowed it to avoid liquidation, secure interim financing and retain control of the resort. It could do so because one of its 14 affiliate companies was incorporated in Delaware: Northshore Mainland Services.
The developer is also pursuing a $192m damages claim against CCA’s parent company, China State Construction, which it lodged on 30 June in the English High Court in London.
Yesterday CCA reasserted that it was the right party to finish the job: "We possess unique expertise and understanding of the project, and we stand ready, willing and able to re-mobilise the appropriate resources to complete the Baha Mar Resort as soon as possible," it said.
The Bahamian government also opposed Baha Mar Ltd’s Chapter 11 bid, filing a winding-up in the Bahamian Supreme Court on 16 July.
After two adjournments the Supreme Court appointed provisional liquidators on 4 September, but limited their powers to preventing the depletion of assets of the Baha Mar resort.
Sarkis Izmirlian cast that decision as a victory, but yesterday’s ruling is a clear defeat, as Judge Carey effectively ceded jurisdiction to the Bahamian Supreme Court by dismissing all Baha Mar-related Chapter 11 cases except the one pertaining to Northshore Mainland Services.
"I can perceive no greater good to be accomplished by exercising jurisdiction over these Chapter 11 cases," Carey said, according to Reuters.
Photograph: The Baha Mar resort, Nassau, the Bahamas, after topping out in 2013 (PRNewswire)