By LAMECH JOHNSON
Tribune Staff Reporter
A SUPREME Court judge yesterday dashed Baha Mar CEO Sarkis Izmirlian’s hope for an immediate approval of his motion to uphold, in the Bahamas, a recent ruling in Baha Mar’s ongoing Chapter 11 bankruptcy proceedings in the United States.
Justice Ian Winder’s decision to adjourn the matter to Tuesday, July 7, for a full hearing followed more than an hour of legal exchanges between Baha Mar’s lawyer Roy Sweeting and Queen’s Counsels Damian Gomez and Brian Simms.
Mr Gomez appeared for the Crown while Mr Simms represented China Export-Import Bank, the resort’s financier.
During the hearing yesterday, Mr Gomez, minister of state for legal affairs, described Mr Izmirlian as “the author of his own destruction,” arguing in the Supreme Court that there was no legal basis for the resort to file for Chapter 11 bankruptcy in the United States.
And during his submissions, Mr Simms called the bankruptcy filing a “well-designed ambush” staged by Baha Mar although the resort had other options.
Mr Simms asked for the matter to be adjourned, which was supported by Mr Gomez.
However, Mr Sweeting argued that an adjournment into the matter would cut very close to the seven-day deadline for his client to get an approved extension from the Supreme Court in the Bahamas for its debtor-in-possession (DIP) financing approval by the Delaware Court to take effect.
Before Mr Sweeting could move the application before Justice Winder, Mr Simms asked to have his client and the Crown to be joined as parties, given their respective interests in the matter.
Mr Simms had taken issue with his client not being made a party on the motion filed to the Supreme Court.
Mr Sweeting, however, said: “It’s certainly not practical to serve every creditor.”
“What is being sought is an important preliminary order,” Mr Sweeting said, adding that this application would facilitate “keeping the lights on at Baha Mar and keep operations going.”
Following this, he said, “these applicants are free to be joined as parties to the proceedings.”
Mr Sweeting emphasised that the motion by Baha Mar was “crucial to the short-term future of these group of companies” and that a “great many of people, including the country, have an interest in this.”
“We’re trying to get the stay imposed in the US extended to the Bahamas,” Mr Sweeting added.
As he objected to an adjournment, Mr Sweeting said that the Delaware court’s approval of debtor-in-possession (DIP) financing was conditional.
“In order to get this, it needs the automatic stay to be extended to the Bahamas,” Mr Sweeting noted, further expressing that Baha Mar’s “legion of creditors” were not being robbed of their money as they were all listed in documents filed in the proceedings in the US.
“If I hear the application to join the parties, I can hear the application on Tuesday?” the judge suggested.
“If that were the case, we’d ask for a temporary, general stay against the creditors from taking action,” Mr Sweeting said, adding: “I don’t see how the AG can speak for creditors. It could speak for the government.”
However, Justice Winder did not grant a temporary stay on creditors taking action.
Yesterday, Mr Simms said that Mr Sweeting’s clients have named “no other party in this application” and that should not be allowed.
Mr Simms referred to an affidavit on behalf of his client, which noted the $2.4 billion advanced by China Export-Import Bank to Baha Mar.
If the proceedings engaged by Mr Izmirlian were going to continue, Mr Simms said: “My client should be allowed to ensure that its securities are protected. If he wants an injunction, he must tender all monies handed over to the duty court agent of my clients.”
The lawyer also dismissed Mr Izmirlian’s purported sense of urgency through the filing for Chapter 11 bankruptcy and said the move “was a planned and well designed ambush.”
“There have been negotiations going on between the Bahamas government, and my client,” Mr Simms continued before being interrupted by Mr Sweeting, who suggested that Mr Simms “seems to be making submissions against my application.”
Mr Simms continued, nevertheless, stating that rather than dealing with his mortgage arrangement, Mr Izmirlian took the action that he did “and there was no notice.”
“They went behind the back of the (EXIM) bank and got the order of the US court,” Mr Simms said, adding, “We have interest in that order.”
“It’s affecting our securities and interfering with our rights under Bahamian law,” he argued.
Mr Simms further argued the only legal connection between the US court jurisdiction and the Bahamas was the first of 15 companies that filed under Chapter 11.
“There was always options for Baha Mar to function and pay its debts,” Mr Simms claimed, “but they’ve opted for this method for reasons of their own.”
He also refuted Mr Sweetings’ claim of urgency, stating that “my understanding is the court in the US doesn’t come back until August.”
Mr Simms ultimately asked the court for adjournment “at least until Tuesday.”
Mr Gomez, when given a chance to speak, said: “I’ll adopt the position taken by Mr Simms.”
“While we don’t have any affidavits, we could have that filed by this afternoon,” he added.
“The applicant and the government entered into Heads of Agreement where about $1 billion in concessions have been granted. Tax issues may arise because of the unilateral approach taken by the applicants,” Mr Gomez said.
He added that if such an “extraordinary” application succeeded, it would mean that Bahamian businesses owed “millions” by Baha Mar would have to get what is owed to them through the United States.
He noted that because of the country’s stake, the government should be a party given its responsibility to its citizens.
As for the resort’s employees, whom Mr Sweeting argued could be adversely affected if the green-light was not given by the Bahamian Supreme Court, Mr Gomez said the resort’s staff need not worry about immediate salaries for the month as the government was prepared to pay “each and every employee at Baha Mar.”
He went on to further criticise, Mr Izmirlian whom he dubbed “the author of his own destruction.”
He said there was no legal basis for the CEO to take the matter to a US bankruptcy court when 14 of 15 listed companies in the matter were registered in the Bahamas and was admitted in the applicant’s own affidavit.
Mr Sweeting contended that the Chapter 11 proceedings were to make arrangements for Baha Mar’s creditors to be paid and for the resort to be completed.
Save for this option, Mr Sweeting said, the resort would not open because “Baha Mar does not have the money.”
“The resort as it stands, is 98 per cent complete. The Chapter 11 proceedings was to drag this thing over the finish line,” the resort’s lawyer said, adding that it would enable Baha Mar to open and “keep Bahamian employees paid.”
On Monday, Baha Mar and its affiliated companies filed for bankruptcy in a Delaware court, blaming the resort’s contractor, China Construction America (CCA), for the construction delays that caused it to miss previous opening deadlines.
The resort also took legal action against CCA’s parent company, China State Construction Engineering Company in the English High Court on Tuesday.
On Wednesday, US Judge Kevin Carey approved the resort’s request to begin tapping into $80m in financing to keep the resort on track for opening while it undergoes Chapter 11 bankruptcy proceedings in that state.
However, the Delaware judge’s approval of the debtor-in-possession (DIP) financing request, to include $30 million to be used by the resort over the 30 days, was conditional to the approval of this country’s Supreme Court.