By NEIL HARTNELL
Tribune Business Editor
Baha Mar was last night accused of “misrepresenting” its creditor base in a bid to justify its Chapter 11 bankruptcy protection filing, as the majority - more than 68 per cent - are Bahamian.
China Construction America’s (CCA) Bahamian subsidiary alleged in legal documents that the developer had sought to “twist the facts” by suggesting that more than 60 per cent of the $3.5 billion project’s creditors were US-based.
CCA’s filings, designed to further support its bid to have Baha Mar’s Chapter 11 action dismissed by the Delaware courts later this week, alleged that the developer removed its 3,300 Bahamian employees from the creditor list to create a misleading picture of its composition.
This action, the Chinese contractor alleged, enabled Baha Mar to produce a ‘creditor list’ that showed some 70 per cent of the $123 million in unsecured ‘trade’ claims against it belonged to US-based creditors.
Implying that Baha Mar was distorting the creditor make-up to justify its decision to head for the Delaware Bankruptcy Court and the Chapter 11 process, CCA Bahamas alleged: “The debtors’ attempts to twist the facts cannot overcome their lack of any ‘real connection’ with the US.
“The debtors claim that approximately 60 per cent in number, and nearly 70 per cent in amount, of the unsecured claims against the debtors are held by creditors in the US.
“However, a review of the creditor matrix from the debtors’ claims agent shows that out of the approximately 5,172 creditors listed, approximately 3,523 are located in the Bahamas.”
CCA Bahamas continued: “The number of creditors located outside the US (excluding the Bahamas) is approximately 268. In sum, the total number of creditors not located in the US is approximately 3,791. Thus, approximately 73 per cent of the debtors’ creditors are located outside of the US.
“The variance in numbers is explained by the debtors’ arbitrary removal of their own employees, approximately 2,200 of whom live in the Bahamas (in addition to the 1,000 employees working at the Melia resort), from the total number of creditors.
“This type of misrepresentation is symptomatic of the debtors’ modus operandi in these cases, under which they seem to believe that if they repeat the same misinformation enough times, it will eventually make it true.”
Tribune Business has previously reported that Baha Mar’s creditor list effectively ‘masks’ the number of Bahamian creditors, and the sums owed to them, especially where local contractors are concerned.
For example, while CCA Bahamas is owed $72.5 million (it is claiming to be owed $140 million), much of that sum is thought to be owed to Bahamian contractors and construction professionals who were hired as sub-contractors and specialists to work on the Cable Beach resort project.
Tribune Business also knows of one major Bahamian contractor, owed $1.5 million, which was hired as a sub-contractor of another CCA Bahamas sub-contractor (US-based Valley Crest). The debt owed to it is thus included in the sum owed to Valley Crest.
CCA Bahamas, meanwhile, argued in yesterday’s legal filings that there was “no legitimate basis” for Baha Mar to argue that its interests, and those of its creditors, would be best served by allowing the Chapter 11 case to continue.
Echoing the ruling by Justice Ian Winder, that Baha Mar’s creditors had “legitimate expectations” that Bahamian - not US - law would govern any bankruptcy-related proceedings, CCA Bahamas said this nation was where all “the money invested in the project was put at risk”.
“The lack of predictability inherent in a US proceeding cannot be in the best interests of the creditors or the debtors,” CCA Bahamas argued.
“Allowing these cases to proceed would also force the creditors - most of which reasonably expected Bahamian proceedings - to prove their claims in a foreign country with unfamiliar laws.
“All but one of the debtors are Bahamian companies, and the main assets of these estates are located in the Bahamas. Forcing parties to retain US counsel and litigate their claims in a foreign venue is hardly in such parties’ best interests.”