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Baha Mar Files For Bankruptcy

Shock move by $3.5bn resort amid constructions deadlock

By SANCHESKA BROWN

Tribune Staff Reporter

sbrown@tribunemedia.net

BAHA Mar CEO Sarkis Izmirlian announced yesterday that the $3.5bn Cable Beach mega resort has filed for Chapter 11 bankruptcy in a Delaware Court in the United States “in order to complete construction and successfully open”.

The shock announcement came less than two weeks after Prime Minister Perry Christie said he received “encouraging” news about a possible impending resolution to the Baha Mar deadlock.

In a statement sent to the media on Monday, Mr Izmirlian said Baha Mar will continue for a period to operate and fund payroll. However, if a consensual resolution cannot be made in the next few weeks, Baha Mar “will have to make some extremely difficult decisions that would include workforce reduction.”

The statement stressed that Chapter 11 is not a liquidation process and the resort has “asked the court for approval to continue paying the salaries and benefits of its employees.”

The Meliá Nassau Beach will continue to operate but the convention centre and golf course will not be open during this process.

Mr Izmirlian blamed the resort’s financial troubles on “repeated delays by the general contractor”, China Construction America, and said filing for Chapter 11 bankruptcy “is the best path to provide the time to put in place a viable capital structure and working relationships to complete construction and successfully open Baha Mar.”

“The general contractor repeatedly has missed construction deadlines. This has caused both sizeable delay costs and forced the resort to postpone its opening. Unable to open, the resort has been left without a sufficient source of revenue to continue our existing business,” Mr Izmirlian said.

“In fact, after the general contractor made a guarantee to us in November 2014, and then again in January 2015, that Baha Mar would be able to open in its entirety on March 27, 2015, we undertook all preparations necessary for this promised opening date, including significant hiring and training of nearly 2,000 employees and purchasing of goods and services. Indeed, even when we subsequently found out that the March 27 deadline was not feasible because the general contractor had still not completed construction, rather than simply downsizing, we maintained our employment levels in anticipation of a revised opening date, utilising our financial resources to pay employees to continue their work at the project and participate in volunteer activities around the island for the benefit of the country.

“At the same time, we sought the help of Baha Mar’s major lender to bring to fruition the completion of construction and the successful opening of Baha Mar, including informing both the lender and the general contractor of our willingness to invest more of our own funds to help cover the delay costs,” Mr Izmirlian said. “Unfortunately, our efforts, as well as those of the Bahamian government, have not accomplished that objective. Construction on the project remains incomplete and, consequently, we have not been in a position to set a revised opening date. Thus, the Chapter 11 process is the best path for Baha Mar to now undertake.”

He added that Baha Mar believes “that a negotiated solution is possible among the existing parties to the resort project that would lead to its completion and successful opening.”

He said to allow time to explore a consensual solution, Baha Mar will, for a period of time, continue to operate and fund payroll.

“We will do our very best to continue to engage the resort’s lender to reach a consensual resolution that assures our ability to complete construction and open successfully. However, if we cannot reach a consensual resolution in the next few weeks, we will have to make some extremely difficult decisions that would include workforce reductions.”

Among the largest unsecured creditors listed were China Construction America Bahamas Ltd, owed $72.6 million in construction costs; Bahamas Electricity Corporation, owed $19.5 million; and Yates-Osprey, owed $5.28 million.

Mr Izmirlian thanked the government of the Bahamas, in particular Prime Minister Perry Christie for his “efforts on behalf of Baha Mar.”

The statement said motions are currently being filed with the court, seeking approval for, among other things, “debtor-in-possession (DIP) financing to fund continued payment of salaries and benefits, and payment to ordinary course suppliers and vendors of any post-petition claims.”

This financing will, among other things, enable Baha Mar to operate and meet its financial obligations in the interim during the Chapter 11 process. The total DIP facility is up to $80 million of which up to $30 million will be utilised by Baha Mar over the next 30 days.

Baha Mar is six months behind its December 2014 opening deadline. It has missed subsequent opening dates in March and May of this year.

In a statement earlier this year, Baha Mar criticised the performance of lead contractor China Construction America, revealing that work at the property had not met the expected “standards of excellence” and was, therefore, not acceptable.

Mr Izmirlian has repeatedly flown to China for discussions about the project.

In May, a well-placed source in the Christie administration told The Tribune that Baha Mar did “not have the cash to finish the project or pay the contractor.”

For months, Baha Mar executives have been locked in meetings with CCA attempting to work out a deal to finish the resort before the end of the year.

Baha Mar has not announced a new opening date for the luxury property.

Comments

Well_mudda_take_sic 3 years, 5 months ago

I wish there was some way the Bahamian people could get out of Christie's own personal hide the $19.5 million owing by the bankrupted Bah Mar to BEC ( i.e. owing to the honest hardworking Bahamian taxpayers! ) Why did the pudgy fella with the short stubby grubby dirty sticky fingers and the Lady Smacker (Leslie Miller) needlessly allow BEC to extend so much credit to such a high risk real estate development project, while at the same time disconnecting thousands of poor Bahamians for the late payment of their BEC bills! Christie, Davis and Miller should be shackled, whipped with a thick Casuarina switch and then taken out back to the wood chop shop for finishing work!!!

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newcitizen 3 years, 5 months ago

Chapter 11 Bankruptcy is for restructuring and gives the company some relief from debt obligations during that period. It does not mean that all of it's debts will be unpaid, infact most companies leave chapter 11 with the same principles involves and the debts on the books are paid. This is essentially a pause while they figure out how to move forward.

Many people seem to be thinking this is Chapter 7 bankruptcy, which is a liquidation event and the assets are split up to satisfy the debts. Atlantis went through Chapter 11 only a few years ago and exited just fine.

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Reality_Check 3 years, 5 months ago

Just name one Chapter 11 Bankruptcy involving Chinese government owned and controlled enterprises as the major creditors that ever survived such proceedings! The Chinese have left mammoth size buildings standing empty in several African countries and have left whole cities standing empty in their own country! They have a very very large wallet, are ruthless in their business dealings, and have a well established policy of just walking away from it all once offended or publicly embarrassed. Chapter 11 proceedings exist and work well for western style capitalists; not so in the case of China's entirely new breed of state (as opposed to individual) sponsored capitalism born out of thousands of years of most unusual cultural nuances.

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gangof4 3 years, 5 months ago

Actually, if I remember correctly, the Bahamas government owes Baha Mar approx. $21 million so that amount is misleading. Don't believe the government has paid that back yet so I guess everybody has adopted the attitude of "we owe you $21 million and you owe us $19 million.....call it even!!"

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Well_mudda_take_sic 3 years, 5 months ago

But the Bahamas government was legitimately disputing the owing of the $21 million because the value of the road works seemed to have been grossly overstated by the Chinese contractors involved. This is exactly the same over-pricing problem Baha Mar (Izmirlian) has with its Chinese general contractor (CCA).

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newcitizen 3 years, 5 months ago

The road works were not completed by CCA, they were done by Bahamar who contracted the majority of the work to ISD and Bahamas Hot Mix

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Reality_Check 3 years, 5 months ago

Read again carefully..."mudda" didn't say the roads were completed by CCA

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Reality_Check 3 years, 5 months ago

EMPHASIS TO KEY POINT MADE BY "BANKER" IN COMMENT TO ANOTHER ARTICLE: Sarkis Izmirlian and his legal representatives outside of the Bahamas must always be mindful of the fact that Perry Christie and his Cabinet are as firmly in bed with the Chinese as they are with the racketeering mobsters behind the 'illegal' gambling houses now operating with impunity on just about every street corner in our country today. Christie, Davis, Wilchcombe and Maynard-Gibson in particular should be seen as being, for all intents and purposes, agents of the Chinese when it comes to that ruthless foreign government's business and other interests in the Bahamas. It is therefore almost impossible for Sarkis/Baha Mar to get an unbiased fair hearing before any court (judge) in the Bahamas on any matter pertaining to the legal actions they have initiated outside of the Bahamas. Sarkis/Baha Mar and their legal representatives must remain very wary of this fact. Being as dependent as the financially weak Bahamas now is on foreign direct investment from China, the lead legal representatives of Sarkis/Baha Mar in the U.S. and U.K. can expect for the Christie-led PLP government and the Attorney-General of The Bahamas (Allyson Maynard-Gibson) to push very hard for the Bahamian courts to have jurisdiction over the matters under dispute and now the subject of asserted claims. Their efforts to do so must be vigorously thwarted or the Chinese will end up obtaining the home field advantage in the Bahamian court system.

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Well_mudda_take_sic 3 years, 5 months ago

As I have said time and time again, the rightful legacy and epitaph of Perry Christie can only most deservedly be: "No single Bahamian has ever caused, nor will ever cause, more harm to the Bahamas than Perry G. Christie."

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marrcus 2 years, 5 months ago

"Ok so Steve Mckinney just reported that CCA owns Bahamar.....yes ppl the Chinese Construction Company.the SAME one in that owns the HILTON.....they are the "NEW OWNERS". And he goes on to say the Chinese has demanded a list of FIFTEEN things of which 13 sign off already. Some we have already heard like they don't want to pay custom duty, no VAT no casino tax, they are demanding 500 BAHAMIAN citizenships for 500 CHINESE BILLIONAIRES. But wait for it guys....they have demanded 1200 NEW WORK PERMITS for Chinese workers AND....are you listening AND half of the THREE HUNDRED plus MILLION it will take to finish BAHAMAR. Yes ppl they not only want tax exemptions, work permits and citizenshipssss... They want us to pay to be GOOSIED. Let's pray Steve Mckinney is wrong...oh yeah it was also mentioned that the Chinese has been given A BAHAMIAN island off Acklins to harvest Cascarilla tree/bark.. the thing used in perfumes. And YUP you guessed it NO BAHAMIANS ALLOWED!!! But we still believe in YOU though...mmmm "

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