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Baha Mar Gets $2m Severance Pay Nod

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar yesterday obtained Bankruptcy Court authorisation to pay almost $2 million in severance monies, with July 20 now seemingly set as the date that will determine the fate of several thousand employees.

Judge Kevin Carey granted Baha Mar permission to pay some $4.4 million in staff wages and benefits that were due prior to the resort developer’s $3.5 billion filing for Chapter 11 bankruptcy protection on Monday.

And he set Friday, July 20, as the date for the ‘final hearing’ with respect to the $1.861 million worth of severance payments that Baha Mar has been given initial authorisation to pay.

That date now appears to be the deadline when Baha Mar decides whether to lay-off its 2,070 recent hires. That decision, in turn, will depend on whether the developer has been able to resolve its differences with its Chinese partners - an outcome that appears unlikely, given that the two sides’ relationship appears to be fractured beyond repair.

Baha Mar, in its initial filing for court permission to continue paying all staff - including those at the Melia - their due wages and benefits during the first Chapter 11 period, described the employees as vital to the success of its planned restructuring.

“The debtors’ success in their restructuring efforts will be highly dependent on the continued support and performance of their workforce,” Baha Mar said in court documents obtained by Tribune Business.

“Indeed, the debtors’ cannot afford for these individuals to be distracted by unnecessary concern over the payment of their wages and other benefits in the ordinary course of operations.

“This relief will assure employees that their wages, salaries and benefits will continue uninterrupted, and thus stabilise the debtors’ workforce.

“Any delay in such payments may cause substantial harm to employee morale, resulting in disruptions in the day-to-day management of the debtors’ business operations.

“Furthermore, the debtors believe it is critical to provide their employees with assurance at this time that they are authorised to continue their [pre-Chapter 11] severance practices, notwithstanding the commencement of these cases.”

Baha Mar added: “The debtors anticipate launching and operating a world-class resort premised upon providing an exceptional level of service necessary to attract a global clientele.

“Prior to the [Chapter 11] date, the debtors devoted substantial resources to hiring and training the finest quality of employees capable of meeting this extraordinary standard.”

The initial filing made no mention of the $1.861 million severance payment, which was included for the first time in the Delaware Bankruptcy Court’s order yesterday. Yet Judge Carey said the July 20 hearing would deal with “the balance of severance payments”.

Apart from the severance payments, the court yesterday gave Baha Mar permission to pay $2.9 million in wages owing prior to the Chapter 11 filing, and a further $1.5 million in employee benefits.

Other payments granted authorisation by the court included $100,000 in reimbursable business expenses; some $25,000 in payroll taxes; and $15,000 in payroll fees.

The Delaware Bankruptcy Court also granted the other reliefs that Baha Mar was seeking. The developer has gained permission to pay taxes and key vendors, although these sums have been capped at a collective $4 million and $3.5 million, respectively, until a full court hearing on August 3.

Baha Mar’s utility providers have all been prevented from discontinuing supplies to it, although all these Orders will be subject to ratification and approval by the Supreme Court in the Bahamas.

And, perhaps most importantly, the Delaware courts have approved the $80 million financing facility that is being put in place by Baha Mar’s principal, Sarkis Izmirlian, to carry the developer through the Chapter 11 period.

Companies in Chapter 11 are protected from their creditors, and given time to reorganise and restructure their financial affairs, provided they come up with enough working capital to pay for their day-to-day operations.

Baha Mar needs $30 million from Mr Izmirlian’s facility to cover its operating expenses until the next court hearings on August 3.

However, Bahamas Investment Authority and Central Bank of the Bahamas approvals (meaning government approvals) are required to close the $80 million facility, and provide Baha Mar with the financing it needs.

It remains to be seen how rapidly the Government moves on this, given that relations with Mr Izmirlian and Baha Mar are likely to be somewhat frosty following the former’s claims that it was ‘blindsided’ by the Chapter 11 filings.

The $80 million facility will also fall into default if Mr Izmirlian ceases to be Baha Mar’s chairman and chief executive, or a Bahamian court fails to extend “the automatic stay to secured and unsecured creditors in the Bahamas” by Monday next week.

Baha Mar’s filings disclosed that it has 3,662 persons on staff, split between 846 salaried workers and 2,816 hourly employees. These, in turn, are split between Baha Mar, the Melia and the developer’s overseas companies.

Baha Mar’s staff includes 640 full-time, salaried workers and 1,953 hourly-paid workers, while the Melia has 159 salaried workers and 843 hourly staff.

Baha Mar’s gross average payroll was pegged at $1.5 million per week, while that for the Melia Nassau Beach Resort was said to be $334,300 per pay cycle.

National Insurance Board (NIB) contributions were said to be $350,000 and $125,000 per month for Baha Mar and the Melia, respectively.

“With respect to the Baha Mar employees, the expatriates are paid monthly, and the average gross payroll for the expatriates is approximately $1.776 million per pay cycle or approximately $407,000 per week,” Baha Mar’s filings said.

“The Baha Mar salaried employees (excluding expatriates) are paid bi-weekly, and the average gross payroll for [them] is approximately $917,000 per pay cycle or approximately $458,500 per week.

“The average gross payroll for the Baha Mar hourly employees is approximately $1.26 million per pay cycle, or approximately $630,000 per week.”

Baha Mar’s filings also revealed that it owes staff some $2.578 million for accrued vacation, paid time off and other employee benefits, with some $138,500 outstanding across the 45 active credit cards that staff use for travel and other business purposes.

Another $2.4 million is owed under Baha Mar’s employee bonus programmes.

Comments

Well_mudda_take_sic 4 years, 5 months ago

Some in Christie's cabinet of morons were apparently overheard moaning that more VAT money will definitely now be needed, but they can't increase the rate from 7.5% to 15% until July 1, 2016 at the earliest.

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TheMadHatter 4 years, 5 months ago

Mr. Irzmirlian ought to see the writing on the wall, and get himself and his family out of this country before they are arrested.

When the Govt says they won't even allow him to pay the staff the monies that are owed them (which they did via the Supreme Court today) - then it is obvious that something is very very wrong.

Clearly Govt wants this to fail, because those employees will now start going elsewhere and there will be not enough workers to re-open the hotel if it could be opened.

The longer he continues to try to make this hotel work (while govt wants it to fail) the longer he remains an enemy of the state, and the state's patience will run out with him.

I mean - what kind of govt or other group refuses outright $80 million which is owed to them? If someone owed me $80 million, I would be very happy if they came and paid me - I would not call the police and ask them to please prevent these people from knocking on my door.

But that's what was done today.

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Sickened 4 years, 5 months ago

Sources say that his family has already left and only he is in The Bahamas at the moment.

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TheMadHatter 4 years, 5 months ago

No - govt has already hinted at a criminal investigation. It is not citizens he has to be fearful of.

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