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Bankruptcy Move Not Recognised In Bahamas

By LAMECH JOHNSON

Tribune Staff Reporter

ljohnson@tribunemedia.net

BAHA Mar’s ongoing Chapter 11 bankruptcy proceedings in the United States will not be recognised in the Bahamas, a Supreme Court judge ruled yesterday morning.

Justice Ian Winder, who had required some time to consider his decision after a six-hour hearing on Monday, took only a few minutes to dismiss the resort’s CEO, Sarkis Izmirlian’s motion to have Baha Mar’s bankruptcy orders approved here. Justice Winder also rejected a request for Baha Mar to get an approved extension for its $80 million debtor-in-possession (DIP) financing approval by the Delaware court to take effect. Baha Mar’s requests for alternate relief were also rejected.

The judge said that he would release his written ruling on the matter within two weeks.

“Having heard counsel for the applicant and counsel for the several respondents,” Justice Winder began, “and having considered the affidavit material filed on behalf of the parties, I refuse the application for an order recognising the plenary insolvent proceedings underway in the District of Delaware and provision of assistance by extending and giving effect to the automatic stay arising through Section 362 United States bankruptcy law.”

“I also refuse the relief pleaded in the alternative, seeking the making of ancillary orders pursuant to Section 254 of the Companies (Winding-Up) Amendment Act. The originating summons filed on June 30, 2015, and amended on July 6, 2015 is therefore dismissed. Costs to the respondents to be taxed, if not agreed.”

“As I indicated earlier, my reasons will follow. My expectation is that it will be in within the next two weeks,” the judge concluded before adjourning court.

Baha Mar’s lawyer Roy Sweeting expressed disappointment at the decision while lawyer for the Export-Import Bank of China Brian Simms, QC, told reporters: “We obviously think the decision is correct and the judge will give his (written) ruling shortly and I think that’s the time for comments.”

On Monday, Mr Sweeting argued that the Chapter 11 route was the best option for all involved to get the resort up and running and also make the necessary arrangements for restructuring of finances as needed.

“The creditors are not shut out of the cold and forced to accept whatever the developer comes up with,” Mr Sweeting said at the time.

Mr Sweeting, to support the application, highlighted that countries around the world have recognised “modified universalism” in the past century.

It is a legal concept relating to the general principle that in relation to corporate insolvency, national courts should strive to administer the estate of insolvent companies in the spirit of international comity.

Mr Sweeting argued that notwithstanding the existence of the Companies (Winding-Up) Amendment Act, “the statute doesn’t abolish common law jurisdiction.”

The Chapter 11 route, he continued, “was, in my client’s view, which I say is a reasonable one, the best of a bad range of options that was available to him.”

Mr Simms, however, motioned for the judge to dismiss Baha Mar’s application immediately.

He pointed out to the judge that Northshore Mainland Services Inc, the foreign representative for all of the companies that filed for bankruptcy protection in Delaware, was not a representative in any capacity concerning the proceedings.

He stressed that this was important because “all of the Baha Mar companies are not foreign representatives to themselves” and because Baha Mar is applying for recognition of the US court’s order on the basis of common law jurisdiction, “a foreign representative would have to apply to obtain recognition.”

The lawyer said that Baha Mar’s application was not asking the court to exercise its jurisdiction, but in fact asking the court to apply US law here when the Bahamas’ own laws concerning insolvency clearly stipulate that this could not be the case.

On Monday, Crown respondent and State Minister of Legal Affairs, Damian Gomez, QC, supported Mr Simms’ submissions, as did Lester Mortimer, QC, and attorney Sean Moree.

Mr Moree and Mr Mortimer represented general contractor China Construction America (CCA) Bahamas Ltd and Cable Bahamas Ltd, respectively.

Cable Bahamas is one of Baha Mar’s Bahamian creditors.

On June 29, Baha Mar and its affiliated companies filed for bankruptcy in a Delaware court, blaming the resort’s contractor, CCA, for the construction delays that caused it to miss previous opening deadlines.

The resort also took legal action the following day against CCA’s parent company, China State Construction Engineering Company in England’s High Court of Justice.

On July 1, 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 in 30 days, was conditional on the approval of the Bahamas’ Supreme Court.

Last week the government filed a winding up petition against Baha Mar. That matter will be heard in the Supreme Court on July 31.

Baha Mar can contest the judge’s ruling in the Court of Appeal.

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