Troubled by construction delays, the developer of Baha Mar — the Bahamian luxury resort being built with the help of Chinese financing and labor — has filed for Chapter 11 bankruptcy protection in Delaware.
The $3.6 billion resort, which was supposed to revitalize Nassau’s Cable Beach area, was initially scheduled to open in December 2014. Since then, the opening has been pushed back several times, sparking the ire of customers who had made reservations.
Sarkis Izmirlian, chairman and chief executive of developer Baha Mar Ltd., said Monday that the board had determined that because of the financial consequences of repeated delays “by the general contractor” and the resulting loss of revenue, voluntary bankruptcy was the best course to finish construction and get Baha Mar open as soon as possible.
“The Chapter 11 process provides the appropriate venue to create a viable financial structure that places Baha Mar’s interests foremost,” he said. The firm also plans to file an application in the Supreme Court of The Commonwealth of the Bahamas seeking approval of orders by the U.S. court.
Izmirlian has agreed to arrange funding for a debtor-in-possession financing facility of up to $80 million to allow Baha Mar to operate and meet its financial obligations. The company said in a press statement that $30 million will be used by Baha Mar over the next 30 days.
The 1,000-acre resort, which plans to include a casino, 18-hotel golf course, multiple pools and four new hotels, was built with the help of 4,100 Chinese laborers and $2.4 billion in financing from the Export-Import Bank of China. China State Construction Engineering Corp, the lead contractor on the project, also had taken a $150 million equity stake.
Although China has done construction projects around the globe with Chinese labor, analysts said China State Construction’s foray into a hospitality project was intended to be a résumé builder.
Izmirlian blamed the general contractor for repeatedly missing construction deadlines. “This has caused both 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.”
This year, after Baha Mar opened bookings, the first wave of visitors was supposed to hit the beach for the weekend of March 27-29. But just a few days before that date, Baha Mar announced on its Facebook page that it wouldn’t be opening as scheduled.
Baha Mar Ltd. gave no indication Monday when the grand opening might be, but said it planned to open the resort “as soon as practicable.”
Because the developer took the contractor at its word that the resort would open as planned on March 27, it hired and trained nearly 2,000 employees and bought goods and services needed to operate the resort, said Izmirlian. After the missed opening, Izmirlian said Baha Mar continued to pay its employees in anticipation of a revised opening date.
In March, China Construction America, a subsidiary of China State Construction, took issue with Baha Mar’s description of the delay, saying the developer’s statements were “wholly inappropriate and inconsistent with the history of this project.” China Construction America did not return phone calls from the Miami Herald on Monday.
As recently as Sunday, Bahamian Foreign Affairs Minister Fred Mitchell told The Nassau Guardian that a deal was “on the table” but said it depended on Izmirlian. Prime Minister Perry Christie was on the phone every day last week with the Export-Import Bank of China, trying to hammer out a deal, he said, without elaborating on the details.
Christie said with the employment of so many Bahamians on the line, “there is a national urgency about this.”
Izmirlian said the company had told the lender that it was willing to invest more of its own funds to help cover the delay costs. “Unfortunately, our efforts, as well as those of the Bahamian government, have not accomplished that objective. Thus, the Chapter 11 process is the best path for Baha Mar” and its associated entities, he said.
“Baha Mar believes that a negotiated solution is possible,” Izmirlian said. But if there is not a consensual resolution in the next few weeks, the company “will have to make some extremely difficult decisions” that would include layoffs, he added.
Christie said that the government “won’t be taking anyone’s side,” but would be available as a “mediator between the parties... to ensure that the interests of Bahamian workers and indeed the interests of the nation as a whole are accorded primacy at all times.”