Nassau, Bahamas — The Bahamas government said on Wednesday it felt “vindicated” by Justice Ian Winder’s rejection of Baha Mar’s application seeking recognition of its Chapter 11 proceedings in Delaware.
The ruling means that the various orders handed down by a US judge after Baha Mar’s bankruptcy filing cannot take effect in The Bahamas.
Among other things, the US judge authorized $30 million in funding, which Baha Mar says is crucial to meet operational expenses and payroll. A portion of that money was also set aside for severance payments for Baha Mar staff.
The US judge also granted Baha Mar significant creditor protection from utility companies like the Bahamas Electricity Corporation, and other creditors.
The Bahamas government, however, maintained that these matters should be handled in a Bahamian court.
Winder did not give reasons for his decision on Wednesday, but said he will do so within 14 days.
In a statement released after the ruling, the government also said the decision paves the way for the appointment of a provisional liquidator to manage Baha Mar’s affairs with a view to getting the stalled project completed and operational.
The government filed a winding up petition against Baha Mar last week seeking to bring the company’s affairs under the control of Bahamian courts.
Baha Mar has said that the process amounts to “an attempted nationalization of a private investor’s assets”, but the government has strongly rejected this claim as an untruth.
Winder said he will hear the petition on July 31.
The government said the winding up exercise is “best suited to oversee the restructuring, completion and opening of the resort”.
“The Supreme Court’s decision sets the stage for a provisional liquidator to be appointed by the court on July 31, 2015, should no agreement be reached between the parties,” the government said.
“The provisional liquidator would be lawfully bound to have regard to the best interests of the Bahamian people, Baha Mar employees, Bahamian contractors, creditors and investors in Baha Mar.”
The government said Baha Mar owes it nearly $59 million.
Baha Mar filed for Chapter 11 bankruptcy in Delaware on June 29.
It is currently involved in a dispute with its lender, the Export-Import Bank of China (CEXIM Bank) and its contractor, China Construction America (CCA) Bahamas.
“We do not believe today’s ruling, for which the government strenuously argued, assures the necessary protection of the assets of Baha Mar, and we do not believe that it is best for the over 2,500 current employees of Baha Mar,” the company said.
“We note that the stay granted by the US bankruptcy court remains in effect, and takes on increased importance in light of this ruling, as all parties must still address that prohibition on the exercise of remedies.”
The government has said that it will observe talks between Baha Mar and CCA as the parties try to reach an agreement to get the project completed.
Baha Mar said it hopes that the government will “stand by its word to be an impartial mediator in our efforts to protect our investment and bring the project to completion”.
In its statement, the government said it remains hopeful for the prompt and successful opening of Baha Mar.
“We encourage all parties to continue negotiations to secure an agreement on the completion and opening of Baha Mar,” the government said.
“Along with EXIM Bank, we are keen observers of the negotiations now underway between Baha Mar and China Construction.”