Sarkis Izmirlian, chairman and CEO of Baha Mar Ltd., the developer of the Baha Mar resort, has announced that, in order to complete construction and open Baha Mar "as soon as practicable," Baha Mar Ltd., and entities associated with it, are voluntarily undertaking the process of Chapter 11 under the U.S. Bankruptcy Code.
The Meliá Nassau Beach resort will continue to operate normally during the Chapter 11, the company said in a statement announcing the decision.
"The Board of Directors has determined that due to the financial consequences of the repeated delays by the general contractor, and the resulting loss of revenue, the Chapter 11 process is the best path to provide the time to put in place a viable capital structure and working relationships to complete construction and successfully open Baha Mar," Baha Mar Ltd. said in a statement. "The voluntary Chapter 11 filing has been made in the U.S. Bankruptcy Court for the District of Delaware. Baha Mar Ltd. will be filing an application in the Supreme Court of The Commonwealth of the Bahamas seeking approval of the U.S. court orders."
Izmirlian has agreed to arrange the funding for the Debtor-in-Possession (DIP) financing facility. This financing will, among other things, enable Baha Mar to operate and meet its financial obligations in the interim during the Chapter 11 process. Specifically, the total DIP facility is up to $80 million of which up to $30 million will be utilized by Baha Mar over the next 30 days.
Mr. Izmirlian said, “I am committed to doing all I realistically can to move Baha Mar forward to be completed and opened successfully. I am confident that, once opened, Baha Mar will be a world-class destination resort that will attract guests from around the world and serve as a key economic sparkplug to The Bahamas. The Chapter 11 process provides the appropriate venue to create a viable financial structure that places Baha Mar’s interests foremost.”
Mr. Izmirlian continued, “The general contractor repeatedly has missed 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.
“In fact, after the general contractor made a guarantee to us in November 2014, and then again in January 2015, that Baha Mar would be able to open in its entirety on March 27, 2015, we undertook all preparations necessary for this promised opening date, including significant hiring and training of nearly two thousand employees and purchasing of goods and services. Indeed, even when we subsequently found out that the March 27 deadline was not feasible because the general contractor had still not completed construction, rather than simply downsizing, we maintained our employment levels in anticipation of a revised opening date, utilizing our financial resources to pay employees to continue their work at the project and participate in volunteer activities around the island for the benefit of the country.
“At the same time, we sought the help of Baha Mar’s major lender to bring to fruition the completion of construction and the successful opening of Baha Mar, including informing both the lender and the general contractor of our willingness to invest more of our own funds to help cover the delay costs. Unfortunately, our efforts, as well as those of the Bahamian government, have not accomplished that objective. Construction on the project remains incomplete and, consequently, we have not been in a position to set a revised opening date. Thus, the Chapter 11 process is the best path for Baha Mar to now undertake.
“Baha Mar believes that a negotiated solution is possible among the existing parties to the resort project that would lead to its completion and successful opening. To position ourselves to achieve that goal, and to allow time to explore a consensual solution, Baha Mar will continue for a period to operate and fund payroll. We will do our very best to continue to engage the resort’s lender to reach a consensual resolution that assures our ability to complete construction and open successfully. However, if we cannot reach a consensual resolution in the next few weeks, we will have to make some extremely difficult decisions that would include workforce reductions.”
By filing the Chapter 11 cases, Baha Mar has subjected itself to the supervision of the United States Bankruptcy Court and has obtained the protections available to the company under the U.S. Bankruptcy Code. These include, among other things, protection from creditor actions and claims against the company, and all of its assets or property, wherever located, through the injunctive relief provided by the Automatic Stay.
Customary First Day Motions are being filed with the court, seeking approval for, among other things, debtor-in-possession financing to fund continued payment of salaries and benefits, and payment to ordinary course suppliers and vendors of any post-petition claims.
Baha Mar, a $3.5 billion integrated gaming and luxury resort in Nassau, The Bahamas, was orignally set to open March 27. That opening date was pushed back in late March, and again in mid-May.
When complete, plans call for 2,200 luxury guest rooms across four hotels – in addition to its namesake, the Baha Mar Casino & Hotel, the resort also includes Rosewood at Baha Mar, Grand Hyatt at Baha Mar and SLS LUX at Baha Mar.
Baha Mar has created a new website at www.bmpathforward.com that will provide resources for the resort's stakeholders and the latest updates on the bankruptcy process.