China Construction America (CCA) Bahamas has accused Baha Mar of using the Chapter 11 bankruptcy process as nothing more than a "bargaining chip" to gain leverage during negotiations with its creditors.

"This court should not entertain the debtors' bad-faith attempts to improperly use the Chapter 11 process to gain tactical litigation advantage and to retain control over a project lacking U.S. ties," said CCA in court documents filed in Delaware yesterday. "CCA Bahamas, therefore, respectfully requests that this court reject the debtors' attempts to misuse the U.S. bankruptcy system by dismissing these cases and allow the Bahamian courts to preside over these proceedings. "These proceedings are, at their core, about The Bahamas." CCA filed a motion last month to have the Chapter 11 cases dismissed.

The company argued that Baha Mar's attempts to seek bankruptcy protection in the United States are "severely flawed". That matter will be heard on August 28. The Bahamas attorney general filed a winding up petition against Baha Mar last month seeking to bring it under the control of the Bahamian court. The government wants the court to appoint joint provisional liquidators to manage Baha Mar's affairs and reach a consensus with its contractor with a view to completing the project. Supreme Court Justice Ian Winder is scheduled to announce his decision on the matter on September 4. Baha Mar opposes the move. CCA said that Baha Mar, through its Chapter 11 filings in Delaware, has made "repeated misstatements of Bahamian laws and convenient omissions of the facts".

CCA said the company is merely using the Chapter 11 process as a litigation tactic to maintain control over the project.

"Dismissal for bad faith is appropriate where foreign debtors manipulate their place of filing to achieve perceived legal advantage in their debt restructuring," CCA said. The contractor also charged that the Supreme Court's dismissal of Baha Mar's application seeking Bahamian recognition of the Chapter 11 proceedings has "rendered these cases (Chapter 11) ineffectual".

"The Supreme Court's decision, which criticizes the debtors' attempts to bring these proceedings in an overseas jurisdiction with no real connection to the 14 Bahamian corporations, has thwarted any chance the debtors may have had to successfully execute a Chapter 11 restructuring plan or obtain debtor-in-possession financing," CCA said.

Baha Mar filed for bankruptcy protection on June 29. Since then it has attempted to reach a deal with CCA and its lender, the Export-Import Bank of China, through negotiations. According to Baha Mar CEO Sarkis Izmirlian, "discussions between us have now stalled due to the court hearings."

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