In a measure of “last resort”, China Construction America (CCA) yesterday filed for chapter 11 bankruptcy protection in New Jersey.
CCA Chairman and CEO Yan Wei said the filing was “ultimately necessitated by a crippling $1.6 billion judgment” issued against CCA and its affiliates by a New York Supreme Court in favor of Sarkis Izmirlian’s BML Properties Limited (BMLP).
Last week, a New York Supreme Court denied CCA’s bid to stay the judgment that was handed down in October. CCA argued that it needed the stay while it perfected its appeal.
“CCA’s financial challenges, which began in 2015, were caused by several factors outside of its control, including a broad retreat from, and policy changes negatively impacting Chinese investment in US-based construction projects,” said Wei in an affidavit that was filed yesterday.
“These business headwinds were further exacerbated by the 2017 commencement of the Baha Mar litigation and the allegations made by BMLP therein, which undermined CCA’s ability to win and execute new business. CCA’s ongoing financial problems have now reached a tipping point with the entry of the Baha Mar judgment.”
Wei said that like many other entities that have sought chapter 11 protection in the face of a significant adverse judgment, CCA is seeking “a breathing spell”.
He said CCA wants to address its ongoing and deepening financial distress, which began before the Baha Mar judgment was issued but has exacerbated and accelerated it; preserve the value of its estate for the benefit of all stakeholders; continue its business operations and pursue its appeal against BMLP.
In October, a New York judge awarded BML Properties Limited $1.6 billion in damages after finding that CCA committed fraudulent acts, which ultimately pushed BML out of its Baha Mar investment.
The defendants in the matter are CCA, China State Construction Engineering Corporation (CSCEC) Bahamas and CCA Bahamas.
CCA Bahamas, which owns British Colonial and Margaritaville Beach Resort, and CSCEC Bahamas did not file for chapter 11.
Wei said CCA was “dragged into a litigation regarding a Bahamas-based dispute involving CCA’s remote affiliates in The Bahamas, CCA Bahamas and CSCEC (Bahamas)”.
“The Baha Mar litigation is far from a run-of-the-mill construction dispute, and it has nothing to do with the CCA Group’s operations,” he said.
“It is instead an effort by the plaintiff, BMLP, to use a three-month delay in construction by CCAB to hold all three of the defendants liable for the entire collapse of Baha Mar’s financing and the failure of BMLP’s business plan, which stemmed from BMLP’s decision to borrow over $2.45 billion against Baha Mar’s assets.”
Wei argued that the recent ruling in New York was wrong and believes the decision will be reversed on appeal.
In a statement issued to the media yesterday, CCA said the chapter 11 filing provides, among other things, for an automatic stay of enforcement of any claim or pursuit of any litigation against CCA.
“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,” Wei said in the statement.
“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.”
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Publish date : 2024-12-22 23:45:00
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