By NEIL HARTNELL
Tribune Business Editor
Baha Mar faces further Government roadblocks even if it obtains Supreme Court recognition of the Chapter 11 bankruptcy protection, as it has yet to obtain necessary Bahamian approvals for the $80 million financing facility created by its principal.
The $3.5 billion developer, in filings with the Delaware Bankruptcy Court, said the Government had yet to produce essential Bahamas Investment Authority (BIA) and Central Bank of the Bahamas approvals for funding that would carry the project through its Chapter 11 reorganisation.
This suggests that the Government possesses numerous levers, outside the court proceedings, to ‘bring Baha Mar to heal’ should it choose to do so.
In this case, the absence of those permits acts as a further obstacle to Baha Mar being able to access the so-called debtor-in-possession (DIP) financing arranged by its chairman and chief executive, Sarkis Izmirlian.
“The DIP Facility requires a permit from the Bahamian Investment Authority, as well as permits from the Central Bank of the Bahamas in respect of the DIP loans,” Baha Mar said in its court filings.
“Despite substantial and ongoing efforts to date, a requisite order has not yet been entered by a court in the Bahamas, and such approvals have not yet been received.
“Until the situation involving the DIP facility is resolved, the debtors’ [Baha Mar] current liquidity position does not enable them to presently fund the payroll of their employees.”
The ‘permits’ obstacle came to light after a US-based company, Strategic Outsourcing, sought a declaration from the Delaware Bankruptcy Court that it “has no responsibility” to fund from its own pocket the $250,000 payroll due to employees at Baha Mar’s Florida and Jersey call centres.
Strategic Outsourcing, a payroll processor and provider of other employment-related services, argued that it “should not be forced to be a lender” to Baha Mar and finance salary payments due to the latter’s US employees simply because the Supreme Court in the Bahamas had yet to give effect to the Chapter 11 proceedings.
That is the initial block to Baha Mar accessing Mr Izmirlian’s $80 million DIP funding, and Strategic Outsourcing alleged: “The debtor [Baha Mar] wants to obtain the benefits of the continued labour of its employees, but wants to shift the burden of paying those wages to a third party.
“Further, under the circumstances here, the timing of repayment to Strategic Outsourcing, indeed any repayment at all, is subject to question.
“That is because repayment depends substantially, if not entirely, upon the funding of the debtor’s post-petition financing. That funding, in turn, is contingent upon, among other things, the agreement of a Bahamian court to recognise these proceedings.
“There can be no assurance that the Bahamian court will take the required action. Strategic Outsourcing should not be required to bear the risk that the Bahamian court will not take the action that is needed to effect a cure of the event of default.”
The default refers to the fact that a condition of the $80 million DIP facility was that it be approved by a Bahamian court within a week of the June 29 filing for Chapter 11 - something that has not happened.
In response, Baha Mar said: “The Debtors have advised the [US] employees that they are working to have payroll funded as soon as practicable, but cannot do so until the DIP facility is funded.
“Indeed, the debtors are working tirelessly in the Bahamas to obtain the necessary order and approvals to enable the DIP facility to be funded.
“The purpose of the [Supreme Court] adjournment was to allow the various parties an appropriate amount of time to attempt to resolve all construction and financing disputes and, thus, pave the way for the Bahamas court to enter the requisite order.”
Baha Mar alleged that Strategic Outsourcing was a joint employer of its US staff under their agreements, meaning it had an obligation to finance payroll.