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 time being.

“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.


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