Delaware – September 15, 2015 (hospitalitybusinessnews.com) Today Judge Kevin J. Carey issued his opinion on the legality of Baha Mar’s chapter 11 filing in the United States.
In a mixed opinion the Judge ruled that the dismissal motions were DENIED in respect to Northshore Mainland Services, Inc, and that the motions were GRANTED, without prejudice, in respect to the other companies.
Northshore Mainland Services, Inc is the only “Baha Mar” company incorporated in the United States. The other companies, which were included in the filing, are all incorporated in, and under the laws of, The Bahamas. So, in effect the Judge admitted that the U.S. court has no jurisdiction over these foreign companies.
In the Judges memorandum he stated:
CCA and CEXIM (the “Movants”) assert that the Debtors’ bankruptcy cases should be dismissed on a number of grounds, including (i) that the Debtors are not eligible for chapter 11 relief in the United States under Bankruptcy Code § 109(a) because all but one of the debtor corporations are organized under Bahamian law and hold few assets in the United States; (ii) that the Debtors filed these chapter 11 cases in bad faith or as a litigation tactic to avoid insolvency proceedings in The Bahamas; and (iii) that the best interests of the Debtors and creditors would be better served by dismissal of these cases so that the parties can proceed with insolvency proceedings in The Bahamas, which is the venue with the most significant contacts and interests in the Project, and it follows that most stakeholders would expect Bahamian law to apply to any winding up proceedings.
According to the memorandum, Baha Mar must has realized that there would be a jurisdiction dispute –
In June 2015, the Debtors opened seven bank depository accounts at JP Morgan Chase Battle, N.A. (Delaware), one in the name of each of the following debtors: Cable Beach Resorts Ltd., Baha Mar Entertainment Ltd., Baha Mar Land Holdings Ltd., Baha Mar Operating Company Ltd., BMP Golf Ltd., BML Properties Ltd., and Riviera Golf Ventures Ltd. (the “JPM Accounts”). Each of the JPM Accounts was funded on June 19, 2015 with a $10,000 opening deposit. There have been no credits or debits to the JPM Accounts other than the initial deposits.
On June 29, 2015, the Debtors filed the chapter 11 cases. On or about the same date, the Debtors filed the Originating Summons with the Supreme Court of the Commonwealth of The Bahamas (the “Bahamian Supreme Court”) seeking recognition of the chapter 11 cases and a stay of all legal proceedings involving the Debtors pending the completion of the chapter 11 cases. Also on or about the same date, the Debtors filed a lawsuit before the High Court in London, England against CSCEC seeking damages under a certain Completion Guarantee based on CCA’s alleged contractual breaches under the Main Construction Contract.
By opening the US bank accounts Baha Mar must have figured that their companies could claim protection under U.S. laws, which they thought would be more preferential than Bahamian laws.
So now the fate of Baha Mar will be decided in the Bahamas. Interim Receivers are already in place.
I looks like control of Baha Mar will be lost by the current owners and that the companies involved will be sold. It is unclear who would be interested in purchasing the project. One issue is that is it a big risk in one location. The other issue is that increased competition for the Bahamas is on the horizon with the expected opening up of Cuba to U.S. citizens.
As the lenders are Chinese, perhaps a Chinese Casino or Hotel company will be the buyer?