By KHRISNA VIRGIL
Tribune Staff Reporter
THE Delaware Bankruptcy Court’s decision to throw out Baha Mar developer Sarkis Izmirlian’s Chapter 11 bankruptcy case yesterday has validated the government and “disappointed” the Cable Beach resort.
Prime Minister Perry Christie said that the US ruling advances the government’s objective and recognises that the interest of the involved Bahamian entities would be best served in this country.
The effect of US Bankruptcy Judge Kevin Carey’s ruling is to remove the last potential obstacle to the Bahamian Supreme Court and its joint provisional liquidators taking full control over the stalled $3.5bn mega-resort. And Baha Mar CEO Sarkis Izmirlian is faced with a stark choice: either reach a deal with the China Export Import Bank (CEXIM) and China State Construction (CCA) and government on far less favourable terms before the November 2 winding-up petition hearing in Supreme Court, or face losing his family’s $850-$900m equity.
Judge Carey said yesterday that if he were convinced that denying the dismissal motions would have the effect desired by the debtors - bringing CCA, CEXIM and the government back to the bargaining table, he might consider denying the dismissal motions. However, he said the evidence did not reflect this and he was not convinced this would happen “in short order”.
The ruling read: “The Dismissal Motions are denied as to the chapter 11 case of Northshore Mainland Services, Inc and pursuant to Bankruptcy Code 305 (a), the Dismissal Motions are granted, without prejudice as to the Debtor’s remaining chapter 11 cases.”
Northshore is an American affiliate company of Baha Mar which does its business in the US.
In a statement yesterday, Mr Christie said: “The government welcomes the decision today of the Delaware Bankruptcy Court to dismiss the Chapter 11 proceedings against the Bahamian Baha Mar entities. In so doing, the Bankruptcy Court agreed that the future of the Baha Mar resort should be determined in the proceedings in the Supreme Court of the Bahamas, in which Justice Winder has appointed provisional liquidators.
“The government’s primary objective is, and has always been, to see the resort completed, opened and operating as soon as possible. The Delaware Bankruptcy Court’s decision advances that objective and recognises that the interests of the Bahamian Baha Mar entities and their creditors will be best served by the Bahamian proceedings and by negotiations.
“The Government therefore invites all parties to join it in co-operating with the provisional liquidators to bring about a prompt resolution of this matter in the interests of the Bahamian people.”
However, Baha Mar maintained that the ruling would have no effect on its priority to ensure that the West Bay Street is property completed and opened as successfully as possible. It pledged to work with the Supreme Court-appointed provisional liquidators with a view to resolving the issues which have prevented the resort from opening without delay.
“Baha Mar is disappointed that the motions by China State Construction and The Export-Import Bank of China to vacate Baha Mar’s Chapter 11 process have been granted by the US Court,” a statement from the resort read, “with the exception of the Chapter 11 case of Northshore Mainland Services. Accordingly, Baha Mar will explore its alternatives with respect to today’s Court decision.
“With respect to the decision, we do note that the Court affirmed that it was appropriate for Baha Mar to file for Chapter 11 in the US Court and that the Chapter 11 filings were made in good faith.
“In its ruling, the Court made clear that the Chapter 11 process ‘with all stakeholders participating, under these circumstances, would be an ideal vehicle for the restructuring of this family of related companies with the ultimate goal of finishing a project said to be 97 per cent complete and, upon its exit from Chapter 11, to be in sound financial footing, with appropriate treatment of creditors’.”
Baha Mar had filed for Chapter 11 bankruptcy on June 29 after a series of opening dates had been missed. It had originally planned to open in December 2014 but postponed to the spring, when the resort blamed CCA for a further delay.
Last night, Baha Mar Joint Provisional Liquidators declared that Delaware court’s dismissal of the resort’s Chapter 11 bankruptcy filing would not change their role.
“Our role from the outset has been to protect and preserve Baha Mar’s assets and focus on bringing all parties to the table such that the resort can open,” said Edmund Rahming, Managing Director of KRyS Global, the Bahamas-based firm appointed with UK-based AlixPartners as joint provisional liquidators.
“As we have stated previously, the successful opening of this significant development is in everybody’s interest,” Mr Rahming said. “Therefore we are focussed on our court-appointed obligations rather than on proceedings outside our control.”
The joint provisional liquidators have called their task of sorting through thousands of pages of documents, contracts and communications accumulated over the last decade “massive” and said the Delaware judge’s ruling would not impact their strategy, obligations or goal as assigned by the Bahamian court.
Mr Rahming said “We have been well supported in this thus far thanks to the co-operation of the parties involved. Given the scale and complexity of this situation there is much to be done and we are hopeful that our process continues in the same positive vein.”