The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas needs to begin moving towards a “rescue culture” and create Chapter 11 -style legislation that will allow companies to restructure rather than go into receivership or liquidation, a senior Bahamian accountant argued yesterday.

Anthony Kikivarakis, who has extensive experience in liquidation and insolvency proceedings, told a Bahamas Chapter of the Association of Certified Fraud Examiners (ACFE) seminar that global trends were moving towards Chapter 11-type restructuring processes.

Mr Kikivarakis said that while insolvency legislation and practices in the Bahamas were largely determined according to principles derived from English common law, the UK has itself shifted its insolvency culture to place greater emphasis on corporate rescues.

“Our laws don’t provide for a Chapter 11-type rescue,” Mr Kikivarakis said. “If a company is doing badly it can only go into receivership or selling off the assets to pay the biggest lender, like a bank, or a liquidation where it’s selling off its assets to pay everybody.

“What we need to do is get what we call a ‘rescue culture’ like Chapter 11. You put someone in there and the company comes up with a plan to say how it can restructure. The company may not be able to pay its debts, but if everyone reduces their debt by, say 30 per cent, and instead of some of those people being creditors they become shareholders, then that takes the burden off of the company.

“When the burden is off, then the company can start again. Once the court approves it, no one can go back and say they don’t like what the court says, and the company gets a fresh start. That’s what Chapter 11 is all about.”

Mr Kikivarakis told Tribune Business: “Instead of liquidating a company you rescue it, and it continues with a new life and probably a new name, but it has the same people. Some of the creditors become shareholders and they keep it going.”

He added, however, that until this nation changes its laws it has to work with the legislation presently in place. “I think a rescue culture is coming. That’s where we need to get. That’s where it’s going globally, rather than just shutting things down. Until we do that we have to abide by what we have.We need to see if we can change the laws a bit,” said Mr Kikivarakis.

Baha Mar Ltd - through its affiliate Northshore Mainland Services, a Delaware company - filed for Chapter 11 bankruptcy protection on June 28, claiming this would allow for a restructuring of the company as Bahamian laws only provide for liquidation and receivership.

A US judge ultimately dismissed the Chapter 11 filing, noting that no greater good would come from allowing the case to proceed in the US. Bahamian accountant Ed Rahming, a partner in KRyS Global (Bahamas), along with two UK accountants, Mark Cropper and Alastair Beveridge of AlixPartners Services,have been appointed as joint provisional liquidators of Baha Mar.

On November 4, the Supreme Court will formally hear the winding-up petition filed by the Government, although parties at the centre of the dispute can come to some agreement before that time.

Philip Galanis, principal of the HLB Galanis accounting firm, who was also a presenter at the seminar, told Tribune Business that the decision to have the Baha Mar matter adjudicated in a Bahamian court - and appoint joint provisional liquidators - were the right decisions.

“Those were the correct decisions. The assets are here, the substantial operations are all based here, the employees are here and the creditors are here. To that end it is far better for this to be determined here as opposed to another jurisdiction that doesn’t fully understand what is going on,” said Mr Galanis.