U.S. Judge Dismisses Baha Mar’s Chapter 11

Published in the Bahamas weekly September 15, 2015

By Diane Phillips & Associates

BahaMar Joint Provisional Liquidators (JPLs) said late today that a decision by the Delaware court dismissing Baha Mar Ltd’s Chapter 11 bankruptcy filing would not change their role.

“Our role from the outset has been to protect and preserve BahaMar’s assets and focus on bringing all parties to the table such that the resort can open,” said Edmund Rahming, Managing Director, KRyS Global, the Bahamas-based firm appointed along 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,” 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.

“We have a significant task ahead of us and are working extremely hard as we continue to gather appropriate information,” said Rahming. “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. Nonetheless it remains a fact that we are in the early stages of our work and while we are clear as to our final goal, there are still many routes to be explored in getting there.

Published in the Wall Street Journal September 15, 2015 

By Stephanie Gleason

A U.S. bankruptcy judge on Tuesday largely dismissed the chapter 11 case of Baha Mar Ltd., saying he “perceived no greater good” would come from allowing the case to continue in the U.S.

Judge Kevin Carey of the U.S. Bankruptcy Court in Wilmington, Del., said in his opinion that the bankruptcy filing of Baha Mar, which is the owner and developer of a stalled $3.5 billion resort in the Bahamas, “is truly an international case” and acknowledged the deep economic interest of the Bahamian government in the resort.

At the crux of his decision, Judge Carey said, was a finding earlier this summer by Justice Ian Winder of the Supreme Court of the Bahamas that the project’s stakeholders expected that insolvency proceedings would take place in the Bahamas. Judge Carey said that he agreed and was dismissing the U.S. case for this reason.

That reasoning didn’t, however, extend to one entity that Baha Mar had placed in bankruptcy, called Northshore Mainland Services Inc. This company is incorporated in Florida and manages U.S. operations. Creditors of that entity couldn’t have expected that it file for bankruptcy outside of the U.S., Judge Carey said, and permitted only that case to continue.

The implications of permitting the Northshore case to move forward weren’t clear Tuesday, even to Judge Carey, who noted that the practicality “remained to be seen.” However, he left open the possibility that allowing Northshore’s chapter 11 case to go forward could “serve as a useful vehicle for the parties as part of an overall resolution…in concert with proceedings in the Bahamas.”

Judge Carey’s opinion also noted his disappointment that those involved in the case hadn’t been able to reach a consensual resolution. He added that he would have been likely to allow the U.S. case to continue had he believed that such a resolution could eventually be reached.

“But the evidence does not reflect this and I am not convinced this will happen in short order,” he said.

Baha Mar said in a statement that it was disappointed that the case was dismissed but “will explore alternatives with respect to today’s court decision.”

Baha Mar’s creditors had requested that the U.S. case be dismissed, clearing the way for the Bahamian proceeding. Judge Carey considered the motions during a hearing late last month but didn’t rule then.

During that hearing, lawyers for major Baha Mar creditors, China Construction America and the Export-Import Bank, argued that matters related to Baha Mar need to be decided by a court with jurisdiction over the government of the Bahamas, which the U.S. court doesn’t have.

The Bahamian government has opposed the chapter 11 case and advocated for a resolution under Bahamian law by urging the court in the Bahamas not to recognize the U.S. proceeding and by filing a liquidation case in the Bahamas for the company.

By contrast, Baha Mar’s lawyer argued during the hearing that its best option for restructuring—and ultimately opening its doors to the public—was through the chapter 11 process.

The ruling from Judge Carey comes a little more than a week after a Bahamian judge appointed a liquidator to preserve the project’s assets in the Bahamas. A ruling on Baha Mar’s request to have the Bahamian insolvency proceeding dismissed is expected in November.