Categorized | Featured, National News

Baha Mar Shocker… Files for Bankruptcy … Employees Told to Stay Home

Baha Mar CEO Sarkis Izmirlian announced yesterday that the resort has filed for bankruptcy.

According to Izmirlian, in a statement released by the resort, 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.

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.”

The statement noted that Baha Mar’s 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, bankruptcy 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.
The opening of the $3.5 billion resort was postponed three times.

Baha Mar was set to open in December 2014, then in March 2015 and then during the first week in May.

According to Izmirlian, missed construction deadlines by the contractor has caused both sizeable 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,” he said.

Izmirlian has now agreed to arrange the funding for the Debtor-in-Possession (DIP) financing facility to help assure that the bankruptcy process is efficient.

“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,” the statement read.

Baha Mar’s voluntary Chapter 11 filing was made in the U.S. Bankruptcy Court for the District of Delaware.

Baha Mar will also file an application in the Supreme Court of the Bahamas seeking approval of the U.S. court orders.

Recently, Izmirlian has been involved in protracted negotiations with China Construction, with the view of getting the necessary funding to open the resort.

It is understood that Baha Mar needs some $300 million to complete the project.

The Bahama Journal reported recently that there were a number of resignations by senior Baha Mar personnel and executives who were hired by the operators of the four hotels that comprise the Baha Mar campus, namely the Grand Hyatt, Rosewood, SLS Lux and Meliá.

In addition, there have been cancellations of reservations into 2017 and some of the executives said their professional reputation have been compromised because of Baha Mar’s failure to open the property.

A few weeks ago, Prime Minister Perry Christie assured Bahamians that the government is working on a resolution for Baha Mar and it will be realized sooner, rather than later.

However, Izmirlian said in the statement that unfortunately, Baha Mar’s efforts to obtain help from its lender to bring to fruition the completion of construction and the successful opening of the resort, as well as efforts made of the Bahamian government were unaccomplished.

He explained that construction on the project remains incomplete and, consequently, Baha Mar is not in a position to set a revised opening date.

Employees Told to Stay Home

Following the announcement that Baha Mar filed for bankruptcy, Izmirlian issued a letter to the resort’s employees telling them “not to physically come to work at this time.”

He told the employees that Baha Mar will continue for a period to operate and fund payroll and the next few weeks will be used to try and reach a consensual agreement with the resort’s bank lender.

“The Baha Mar project is dependent on our lender working with us immediately to achieve such an agreement,” Izmirlian added.

He explained that if an agreement cannot be reached, Baha Mar will have to make some extremely difficult decisions that would include workforce reductions.

However, in the statement issued by Baha Mar, Izmirlian said Bahamians should no longer have to endure the adverse effects of the general contractor not fulfilling assurances regarding the completion of the resort’s construction, forcing in turn embarrassing delays of Baha Mar’s opening.

“Nor should members of the travel industry and guests continue to face understandable frustration and disappointment caused by the failure to complete construction. All of this now stops with and can be remedied through the Chapter 11 process,” Izmirlian said.

Written by Jones Bahamas

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