537 B.R. 192
Bankr. D. Del.2015Background
- Debtors are a group of companies developing the Baha Mar resort in The Bahamas; all but one debtor (Northshore) are Bahamian corporations. Northshore is a Delaware corporation operating U.S. call-center/marketing offices.
- Major contracts: Main Construction Contract (governed by New York law) and a $2.45 billion Prepetition Credit Agreement with CEXIM (governed by English law); certain security documents governed by Bahamian law.
- Debtors filed Chapter 11 in Delaware (June 29, 2015) amid severe liquidity problems; sought DIP financing and filed parallel proceedings in Bahamian and English courts seeking recognition/relief.
- Bahamian Supreme Court initially refused to extend the U.S. automatic stay; later (Sept. 4, 2015) appointed provisional liquidators for seven Bahamian debtors with limited powers to preserve assets and pursue compromise/restructuring.
- CCA and CEXIM moved to dismiss the U.S. cases arguing ineligibility, bad-faith forum shopping, and that Bahamian insolvency proceedings are the appropriate forum; Debtors argued Chapter 11 better serves a consensual restructuring and preserves more options.
- Court ruled: debtors (collectively) meet §109(a) eligibility; no dismissal for bad faith under §1112(b); but under §305(a) the Court abstained and dismissed without prejudice all Bahamian debtors’ Chapter 11 cases in favor of Bahamian proceedings, while denying dismissal as to Northshore’s Chapter 11 case.
Issues
| Issue | Movants' Argument (CCA/CEXIM) | Debtors' Argument | Held |
|---|---|---|---|
| Section 109(a) eligibility | Debtors (mostly Bahamian) lack U.S. residence, place of business, or property; ineligible | Debtors point to U.S. bank accounts (~$11.8M aggregate), trademarks and Northshore’s U.S. offices/employees | Debtors meet §109(a); petition-date contacts (Northshore’s U.S. operations and Debtors’ U.S. property/accounts) sufficient |
| §1112(b) good-faith filing | Filing is forum shopping/bad faith to avoid Bahamian winding-up; tactical litigation advantage | Chapter 11 filed to preserve restructuring options and complete the Project, not patently abusive | No bad faith; §1112(b) dismissal denied — filings served valid bankruptcy purpose |
| §305(a) dismissal/abstention | Bahamas is the natural forum: majority of creditors, assets, incorporation, and local interest; Bahamian proceedings can effect restructuring via provisional liquidators | Chapter 11 offers unique protections (DIP financing, executory-contract powers, debtor-in-possession control) and creditors include many U.S. claimants; U.S. forum better for global stakeholders | Exercising discretion under §305(a), court abstained in favor of Bahamian proceedings for all Bahamian debtors and dismissed those cases without prejudice; Northshore’s case retained in U.S. |
| Comity / enforceability of orders | Bahamian courts have primacy; U.S. orders may be unenforceable in The Bahamas; comity favors abstention | Debtors note some contracts submit to U.S./New York venue and seek U.S. relief for certain creditors | Comity weighed for abstention: Bahamian proceedings found procedurally fair; no U.S. public-policy conflict; supports dismissal under §305(a) for Bahamian entities |
Key Cases Cited
- In re Global Ocean Carriers Ltd., 251 B.R. 31 (Bankr. D. Del. 2000) (test for §109(a) eligibility and application to each debtor)
- In re Aerovias Nacionales De Colombia, S.A. (Avianca), 303 B.R. 1 (Bankr. S.D.N.Y. 2003) (minimal U.S. property suffices for §109(a) eligibility)
- In re Integrated Telecom Express, Inc., 384 F.3d 108 (3d Cir. 2004) (Chapter 11 petitions must be filed in good faith; totality-of-circumstances test)
- In re 15375 Memorial Corp. v. BEPCO, L.P., 589 F.3d 605 (3d Cir. 2009) (good-faith inquiry focuses on valid bankruptcy purpose and tactical litigation advantage)
- In re Paper I Partners, L.P., 283 B.R. 661 (Bankr. S.D.N.Y. 2002) (place of business concept and §109(a) analysis)
- JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418 (2d Cir. 2005) (deference/comity to foreign insolvency proceedings when procedurally fair)