The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar yesterday warned it would suffer “great harm”, including the loss of $8 million in ‘key money’, if the Rosewood Hotels brand was permitted to withdraw from the project.

The developer, in opposing Rosewood’s bid for the Chapter 11 ‘stay’ to be lifted so it could exit, argued that the resort brand’s withdrawal would both undermine the $3.5 billion project’s restructuring efforts and value to a buyer/new investors.

In arguments that were also supported by Baha Mar’s unsecured creditors committee, the developer branded the arguments to support Rosewood’s withdrawal as “puffery”.

It also slammed as “incorrect” the assertions by Rosewood that there were a number of “incurable defects” violating the two parties’ agreements - such as the allegation that Baha Mar did not own the land upon which its hotel sits.

Baha Mar’s documents also reveal that the Public Treasury on June 30, 2015, requested one day after the Chapter 11 bankruptcy protection that the developer re-convey to the Government all land that it had not used for the development.

The developer added that it had yet to be served with the Government’s legal action, filed in early July, that sought to recover land parcels that were “presumably the same as covered by the June 30 letter”.

Calling on the Delaware Bankruptcy Court to deny Rosewood’s withdrawal motion, Baha Mar alleged: “Rosewood has not come remotely close to satisfying its substantial burden of demonstrating cause to lift the automatic stay to terminate the debtors’ valuable Rosewood Hotel agreements, which are of critical importance to their restructuring efforts.

“Rather, Rosewood’s motion is ripe with puffery and conclusory pronouncements about the debtors’ inability to assume, or assume and assign, the license agreement, and cure certain purported defaults under the Rosewood Hotel agreements.”

In the case of the licence agreement, Baha Mar said the agreement provided for the Rosewood brand to be transferred to a new buyer if the project was sold - either in whole, or just that hotel.

As for the defects, Baha Mar argued: “Any alleged defaults that may exist under the applicable agreements are either capable of being cured upon assumption or assignment, or are not required to be cured.

“Moreover, Rosewood’s blanket assertion that non-monetary defaults are incapable of being cured is simply false as a matter of law.”

Going through Rosewood’s list of alleged ‘incurable defects’, Baha Mar said it was supposed to have “violated its representation” to the hotel brand that its property stood on land owned by the developer.

Other so-called ‘defects’ include a construction work-stoppage for more than 30 days; Baha Mar failing to pay its employees and certain fee payments; and ther Chapter 11 filing constituting a licence default.

“Debtors either have the ability to cure the purported defaults, or are not required to cure them because they are neither material nor have caused substantial economic harm to Rosewood,” Baha Mar blasted back.

“In either event, these alleged defaults do not serve as a bar to the debtors’ potential assumption of the Rosewood Hotel agreements.”

Turning to each individual allegation, Baha Mar added: “Rosewood states that Baha Mar Ltd is in default under the Rosewood Hotel agreements because the land on which the hotel has been constructed is not owned by Baha Mar Ltd, which violates certain provisions of the various Rosewood Hotel agreements.

“The land, however, is owned by two wholly-owned subsidiaries of Baha Mar Ltd: Baha Mar Land Holdings Ltd and BMP Golf Ltd. Thus, this technical default is capable of being cured upon assumption: Baha Mar Ltd could cause its wholly-owned subsidiaries to transfer the land to Baha Mar Ltd upon receipt of certain approvals by, among other third parties, the Government of the Bahamas.”

Baha Mar continued: “Further, Rosewood has been aware of the ownership of the land since at least March 2015, and it had the opportunity to cure such default through a simple Assignment and Assumption Agreement proposed by the debtors.

“A draft of the proposed Assignment and Assumption Agreement, which contained only three substantive paragraphs, would have cured the technical default by assigning the Rosewood Hotel agreements to the two wholly-owned subsidiaries that owned the land.

“And, as additional protection for Rosewood, Baha Mar Ltd would have remained fully liable under the Rosewood Hotel agreements on a joint and several basis. That draft agreement was provided to counsel to Rosewood on April 15, 2015. Rosewood, however, chose not to sign such agreement, thereby preventing the cure of this technical breach.”

Baha Mar argued that the construction delay would be cured by the resumption of work, while Rosewood’s Bahamian employees were current on all salaries owed to them. Expatriate staff had “been paid all amounts owed to them through the end of July”.

As for Rosewood’s contention that the $3.5 billion project would not be harmed by the brand’s withdrawal, Baha Mar retorted: “To the contrary, lifting the automatic stay to allow Rosewood to terminate the Rosewood Hotel agreements will cause significant harm to the debtors.

“With the project approximately 97 per cent complete, keeping the various brand agreements, including Rosewood’s, is critical. The agreements with the brands, including Rosewood, have significant value to the debtors’ estates.

“They are an integral part of what Baha Mar will be – a 3.3 million square foot world-class resort complex consisting of many first-class amenities, four premier hotels, a convention centre, golf course, spa and racquet club.

“Any potential acquirer of the debtors’ assets (or financier of the chapter 11 cases) would discount the value of the debtors’ estates (to the detriment of all creditors and parties in interest) if the Rosewood Hotel agreements were terminated,” Baha Mar added.

“Furthermore, the debtors will suffer hardship if the Hotel Management agreement is terminated because Rosewood may not be required to pay $8 million in ‘key money’ to the debtors upon the opening of the Project.”

Baha Mar also denied Rosewood’s assertion that its brand was being “diminished and tarnished” by its association with the Cable Beach project.