The unfinished Baha Mar resort in Nassau, Bahamas, is filing
for Chapter 11 bankruptcy protection in order to complete construction and open
as soon as practical, according to a statement issued late Monday by Sarkis
Izmirlian, chairman and CEO of Baha Mar Ltd., the developer.
Baha Mar’s board of directors determined that due to the
financial consequences of repeated delays by the general contractor, China
State Construction, the
Chapter 11 process was the best path to put a viable capital structure in place
to complete construction and open the resort.
The filing was made in the U.S. Bankruptcy Court in
Delaware. Baha Mar will file an application in the Supreme Court of the Bahamas
seeking approval of the U.S. court orders.
Under terms of the filing, Izmerlian agreed to arrange the
funding for the debtor-in-possession (DIP) financing facility.
The financing will enable Baha Mar to operate and meet its
financial obligations during the Chapter 11 process.
The DIP amount is up to $80 million, of which up to $30
million will be utilized by Baha Mar over the next 30 days.
Izmerlian said that the general contractor repeatedly missed
construction deadlines, which caused sizable 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,” he said.
The original opening date had been set for December 2014.
After China State guaranteed that the resort would open on March 27, 2015, Baha
Mar undertook a number of preparations, including the hiring and training of
close to 2,000 employees and purchasing goods and services.
When the March 27 date came and went with no opening because
construction was not completed, Izmerlian said Baha Mar maintained employment
levels and salaries in anticipation of a revised opening date.
Baha Mar sought help from its major lender to bring the
project to fruition. “We informed both the lender and the general contractor of
our willingness to invest more of our own funds to help cover the delay costs.
Our efforts, as well as those of the Bahamian government, have not accomplished
that objective,” Izmerlian said.
“The Chapter 11 process is the best path for Baha Mar to now
undertake,” he said.
Baha Mar will continue to operate and fund payroll for the
“Baha Mar believes that a negotiated solution is possible
among existing parties that would lead to its completion and opening. We will
do our best to continue to engage the resort’s lender to reach a consensual
solution to complete construction and open,” he said, but warned that if a
resolution is not reached in the next few weeks, difficult decisions would have
to be made, including workforce reductions.
Izmerlian referred to the frustration and disappointment
among members of the travel industry and guests because of the failure to open.
“All of this now stops with and can be remedied through the
Chapter 11 process,” he said.
Baha Mar hotels include the Grand Hyatt, Rosewood, the Baha
Mar Casino & Hotel and the SLS Lux. The project’s fifth hotel and lone
pre-existing property, the Melia Nassau Beach, will continue to operate during
the Chapter 11 proceedings.