NASSAU, BAHAMAS – CCA Construction, Inc. has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey to protect its interests and pursue an appeal of a New York State Supreme Court ruling in the Baha Mar resort dispute, which the company argues was “erroneous.”
In a statement, CCA said: “The actions are designed to preserve CCA’s pursuit of its appeal of the Court’s flawed analysis and to protect the interests of CCA’s stakeholders during the appeals process. Consistent with these objectives, CCA today commenced a Chapter 11 case under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of New Jersey. The court-supervised process provides, among other things, for an automatic stay of enforcement of any claim or pursuit of any litigation against CCA. The Chapter 11 case does not include any of CCA’s subsidiaries, including Plaza Group Holdings LLC, CCA Civil, Inc., China Construction America of South Carolina, Inc., Strategic Capital (Beijing) Consulting Co., Ltd., its parent company CSCEC Holding Company, Inc., or any other affiliates, whose business and operations will continue as normal.”
CCA intends to request the Bankruptcy Court to modify the automatic stay and allow it to join its co-defendants, CCA Bahamas Ltd. and CSCEC Bahamas Ltd., in pursuing an appeal of the New York State trial court decision. These non-debtor defendants are not subsidiaries or affiliates of CCA and are not included in the Chapter 11 filing.
Yan Wei, Chairman & CEO of CCA, said: “Our actions today are intended to protect CCA’s right to appeal the New York state court’s fatally flawed decision and preserve the value of CCA for the benefit of all stakeholders while the appeal process plays out. The record is clear that BML Properties’ losses were entirely the result of its own gross mismanagement and irresponsible actions, and that the lower court’s decision suffers from multiple, insurmountable errors of law. Among its many failings, the lower court’s decision completely ignores the reality that CCA was not involved at all in the Baha Mar construction project. We look forward to presenting our arguments to the appellate court.”
The Appellate Division of the New York Supreme Court recently denied CCA’s motion to stay the enforcement of a $1.6 billion judgment awarded to Sarkis Izmirlian, the original developer of Baha Mar, and vacated the interim stay granted in November. This cleared the way for the immediate enforcement of the judgment, which holds CCA liable for fraud and breaches of contract that allegedly led to the 2015 bankruptcy of the Baha Mar resort.
The ruling, awarded to Baha Mar’s original investor Sarkis Izmirlian, found that CCA committed fraudulent actions that led to BML’s exit from the Baha Mar project. CCA argued that a stay was necessary to prevent insolvency, which it claims would impact its operations at two Bahamian resorts—British Colonial and Margaritaville—and potentially disrupt ongoing construction projects that employ hundreds of Bahamians.
Justice Andrew Borrok found that CCA, the U.S. arm of China State Construction Engineering Corporation, defrauded BML and breached its investment agreement, leading to BML’s $845 million loss. The court ruled that CCA’s actions caused Baha Mar’s bankruptcy in June 2015, citing four instances of fraud and six contractual breaches. This resulted in a $1.6 billion damages award. The judgment also noted that CCA’s $54 million purchase of the British Colonial resort, rather than paying Baha Mar subcontractors, triggered a liquidity crisis. Additionally, the court found that CCA’s $2.3 million payment to Notarc Management Group, run by Leslie Bethel, was intended to “curry favor” with the Bahamian government.
In light of this, CCA has filed “first-day” motions to secure court approval to continue its operations as usual during the Chapter 11 process. CCA’s parent company, CSCEC Holding Company, Inc., is providing $40 million in debtor-in-possession (DIP) financing, which will enable CCA to maintain liquidity and continue business operations during the bankruptcy proceedings. CSCEC Holding has also agreed to provide additional funding directly to CCA’s subsidiaries to ensure their continued operation throughout the Chapter 11 process.
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