By KHRISNA VIRGIL
Tribune Staff Reporter
ROSEWOOD Hotels and Resorts International, a hotel brand at the stalled Baha Mar resort, on Wednesday filed a motion in a Delaware bankruptcy court to terminate its licence with the $3.5bn property on West Bay Street.
The motion was filed the same day the government began arguments for its petition to wind up Baha Mar in the Supreme Court on the grounds that it owes the state upwards of $59m to various entities.
Rosewood argued in the court documents that not only did the resort not have the money to uphold obligations under its agreement, but the company alleged that Baha Mar was not upfront in revealing the true ownership of the land on which the resort is built.
Meanwhile, in response to this turn of events, Robert “Sandy” Sands, Baha Mar’s senior vice president of government and external affairs, placed blame on the Christie administration saying Rosewood’s motion was in direct response to government’s decision to oppose the resort’s Chapter 11 bankruptcy action which was filed on June 29 in the US.
“Under the US Chapter 11 process,” Mr Sands said in a statement, “property of a debtor’s estate is protected by the automatic stay, and we will address this request for relief from the automatic stay with the bankruptcy court in due course.
“Unfortunately, as the motion itself makes clear, this action is a direct result of the efforts of the government of the Bahamas to both oppose the recognition of the Chapter 11 process in the Bahamas and pursue its current course of action, which has injected uncertainty and disruption, and prevented Baha Mar from moving forward in a productive manner to complete and open the resort.”
Rosewood said in its filed motion that there were several reasons which warranted the decision to move forward with legal action to terminate the lease with Baha Mar.
“Baha Mar has extremely limited access funding to perform its obligation under the Rosewood Hotel Agreement and in fact it is not timely performing its obligation to Rosewood under the Rosewood Hotel Agreements,” the lengthy motion read.
“Since commencing their Chapter 11 cases, the debtor almost immediately defaulted on their DIP (debtor in possession) loan agreement as a result of the failure by the debtors (Baha Mar) to have obtained the approval by the Central Bank of The Bahamas, among other things.”
“In addition, Baha Mar has incurred numerous defaults under the various Rosewood Hotel Agreements, many of which are incurable.”
The motion continued: “Among other things, Baha Mar is in violation of its representation and warranty to Rosewood that it owns the real property on which the hotel and associated residences are situated (and) construction of the hotel has ceased for more than 30 consecutive days.
“In addition, as a material inducement for Rosewood to enter into the Rosewood Hotel Agreements, Baha Mar represented and warranted to Rosewood that Baha Mar owns the Land.
“However, Baha Mar has told Rosewood that it does not in fact own the Land, and, a preliminary search performed on August 14, 2015, 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. Therefore, Baha Mar has incurably defaulted under the Licence Agreement and the Hotel Management Agreement,” Rosewood said.
According to a writ filed by Attorney General Allyson Maynard-Gibson at the end of June, government agreements with Baha Mar state that it could exercise its right to serve notices on the resort to reconvey the Crown land where the resort sits, if it missed certain obligations by specified dates.
Meanwhile, Rosewood also said Baha Mar failed to pay both the rank and file employees and the senior executives at the hotel, who are needed to run the hotel and has failed to reimburse Rosewood for pre-petition and post-petition fees and expenses due under the Rosewood Hotel Agreements.
The hotel further insisted Baha Mar’s filing of its Chapter 11 case is a default under the License Agreement and other Rosewood Hotel Agreements. This is cause for the court to modify the stay to permit the Rosewood to terminate the Rosewood Hotel Agreements, it was argued.
Rosewood entered into a licence agreement with Baha Mar on July 31, 2011. In this contract, Rosewood, as licensor, agreed to license to Baha Mar Rosewood’s trademark and service marks on a non-exclusive basis in connection with the sale and marketing of the residences located at the hotel.
“At all times, Rosewood remains the owner of the Rosewood marks and has the right to use and market them for other purposes except as delimited in the License Agreement. The term of the License Agreement is ten years and terminates on August 29, 2021, unless extended or terminated pursuant to its terms,” the motion says.
“In exchange for Baha Mar having the non-exclusive use of the Rosewood marks during the term of the License Agreement, Baha Mar is obligated to pay to Rosewood 4 per cent of the gross sale price received from the initial sale of each residence at the hotel to a third-party, and 2 per cent of the sale price received from the initial sale of each residence at the hotel to any insider of Baha Mar.”
Baha Mar further signed onto a management agreement, also signed in 2011, in which Rosewood agreed to operate and manage the hotel for a term of 30 years, unless terminated earlier pursuant to its terms.
As a result Baha Mar agreed to pay to Rosewood, inter alia, an annual base management fee determined by reference to a formula based on the hotel’s gross revenue, subject to certain adjustments. The agreement also provided for an annual royalty fee and an annual incentive fee.
Baha Mar is also obligated to pay the employees needed to run the hotel and to pay to Rosewood certain other amounts to reimburse the brand for certain costs incurred.
“Baha Mar agreed to pay to Rosewood a service fee equal to $150,000, payable in instalments, which has not been fully paid, plus out-of-pocket expenses, which are now owing for both pre-petition and post-petition periods,” the motion says.
In a fourth agreement – the Management Cooperation Agreement – Baha Mar and the other hotel managers agreed to cooperate with each other in order to integrate certain aspects of the operations of the various hotels and common areas at the project.
The term of the Management Cooperation Agreement is for so long as the project is open and operating to the public as a resort regardless of the identity of the hotel operators.
The brand maintained that by filing the Chapter 11 bankruptcy, Baha Mar defaulted on its license agreement, which permits the agreement termination request.
Up to press time, Rosewood was the only hotel brand indicating that it wanted to sever ties with Baha Mar.
The other brands at the mega resort include the 1,000-room Baha Mar branded Casino Resort & Hotel, a 707-room Grand Hyatt, a 300-room SLS Lux, and the 694-room Meliá, which was formerly the pre-existing Sheraton.
Morgans Hotel Group and its Mondrian brand pulled out of the project last year and was replaced by the SLS Lux brand.
A hearing on Rosewood’s motion will be held on September 18 at 11am before Kevin J Carey at the United States Bankruptcy Court for the District of Delaware.