Baha Mar on the Ropes?

A director of the trouble-plagued Baha Mar project in the Bahamas says the termination of the project’s Chapter 11 bankruptcy status will jeopardize the $3.5 billion resort’s “commercial viability.” Sarkis Izmirlian (l.) is no longer CEO of Baha Mar.

Hotel brands, tenants could jump ship

An official with an unfinished multibillion-dollar Bahamas resort project says a judge’s decision to end the project’s Chapter 11 bankruptcy protection is a threat to the property’s “commercial viability.”

Director Dionisio D’Aguilar told the Bahamian Tribune Business that Justice Kevin Carey’s ruling has “opened up a can of worms” and may cause the resort’s hotels, and possibly some of its retail and restaurant tenants to flee the troubled project.

“The beauty of the Chapter 11 process was that it allowed us to preserve Baha Mar in its current state while we dealt with the relationship with China Construction America,” D’Aguilar said. “Unfortunately, the big elephant in the room now that the Chapter 11 has fallen away is all your agreements and all your relationships that are in place become open. Are they in play, open to renegotiation? How’s that going to work?”

One brand already looking for the exit is Rosewood Hotels. That firm could be joined by Grand Hyatt and SLS, whose position was described by the Tribune as “uncertain.” And Bahamian-owned retail and restaurant tenants may fear they will be forced to deal with a team of provisional liquidators led by Justice Ian Winder.

Back in July, Bahamian Prime Minister Perry Christie said he would take over the resort in the capital city of Nassau. At the time, construction had ground to a halt on the massive luxury development. Baha Mar had been expected to create about 5,000 new jobs and generate more than 10 percent of the Bahamas’ gross domestic product. “The completion of the Baha Mar resort is a matter of the utmost national importance,” Christie said at the time. “Baha Mar must open.”

Baha Mar Chairman Sarkis Izmirlian, who was later removed from his position, blamed China Construction America Inc., a unit of China State Construction, for problems that delayed the original March 27 opening. The contractor, in turn, blamed Baha Mar for mismanaging the project. A second opening date in May came and went. In June, Baha Mar Ltd. filed for Chapter 11 bankruptcy protection in a Delaware court. Last week, the U.S. court scheduled a hearing on Rosewood’s withdrawal bid.

D’Aguilar continues to rail about the project’s unprotected status. “Chapter 11 served to protect all the agreements in place, and this ruling puts them into doubt. Will people try to pull out, renegotiate? It opens up a real can of worms. You don’t want to end up with a legal victory and everyone’s bolted. To change course now will lead to enormous delays.”

The goal of Winder and the liquidation team is to “preserve Baha Mar’s existing assets and try to reach a commercial settlement between the developer and its Chinese partners, without interference, distractions and encumbrances coming from the Delaware Bankruptcy Court,” the Tribune reported. But any restructuring and settlement plan would be likely to be compromised if the hotel brands choose to leave.