Baha Mar – Too Big To Fail?
News Americas, LONDON, England, Weds. Aug. 12, 2015: Hardly a day passes without a new twist in the increasingly tense and acrimonious legal battle over the unfinished US$3.5 billion Baha Mar resort on New Providence in the Bahamas.
Not only do the effects of the recent decision by the developers to seek bankruptcy protection for the resort continue to spread locally, with far-reaching implications for employment and the resort’s local and international creditors; but it also now touches Government, the courts, national sovereignty, domestic politics, and potentially, investor and tourism confidence, and the Bahamas relations with China.
So enveloping and complex has the issue become that the implications of projects on a scale so large as to dwarf or skew a national economy, deserves wider reflection.
In the Bahamas there are four main protagonists: Baha Mar and its CEO, Sarkis Izmirlian; the Export-Import Bank of China (CEXIM) which is financing the resort; China Construction Americas (CCA) and its state-linked parent The China State Construction Engineering Corporation (CHEC); and the Government of the Bahamas.
The basic story is that after growing delays related to the completion and opening of the resort, the developers filed for Chapter 11 bankruptcy protection in Delaware in order they said, to be able to complete construction and open as soon as practical. At around the same time Baha Mar filed a separate suit under English law against the resort’s principal contractor seeking more than US$192m in damages and interest to compensate for delays, alleged substandard work and for remediation. CHEC was listed as the defendant.
In the US the court agreed to the Chapter 11 application and Baha Mar then sought an order in the Bahamian courts recognising the ruling. However, the Bahamas government challenged this noting that it would have serious and far-reaching implications for Bahamian sovereignty, and the Bahamian court denied Baha Mar’s application for recognition of its Chapter 11 bankruptcy proceedings.
Separately, the Chinese company and the bank sought to have the US court dismiss the bankruptcy case arguing that it belonged in the courts of the Bahamas.
Then in a further twist following the failure of discussions in Beijing involving all of the interested parties, the Bahamas Prime Minister, Perry Christie, said that the country’s Attorney General would begin liquidation proceedings to ensure the resort is completed.
Consequently on July 31 the Bahamian government asked the islands’ Supreme Court to bring the company’s affairs under the control of the Bahamian courts and appoint a liquidator to restructure, complete and then open the resort. However, the matter was adjourned to August 19 in the hope that negotiations between the developer and the bank can resolve the issue.
Unfortunately since then there have been a number of potentially explosive developments.
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