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Barnes Bay, Viceroy Anguilla Owner, Wins Approval of Auction

May 19 (Bloomberg) -- Barnes Bay Development Ltd., owner of the Viceroy Anguilla Resort & Residences on the British West Indies island of Anguilla, won court approval to hold an auction on July 27 with an affiliate of Starwood Capital Group LLC as the lead bidder.

U.S. Bankruptcy Judge Peter J. Walsh approved procedures that will govern the auction at a hearing today in Wilmington, Delaware. Walsh overruled objections from creditors that had intended to buy units at the resort, while allowing them to seek remedies in Anguillan courts.

“I’m not approving a sale today,” so the issues raised by the creditors don’t exist yet, Walsh said. He said he will lift the so-called automatic stay to allow the creditors “to pursue whatever rights they think they have in their units.”

Barnes Bay, based in Beverly Hills, California listed about $531 million in assets and about $462 million in debt as of Dec. 31 in Chapter 11 documents.

Lawyers for the creditors asserted that the proper venue should be in Anguilla, and the U.S. court might not have authority to sanction the company’s sale. In some instances, Aguillan courts “have not recognized U.S. orders,” Robert G. Sanker, a lawyer for creditor RJR Viceroy Ltd., told Walsh.

Michael Cooley, a lawyer for Barnes Bay, disagreed, saying, “The bankruptcy court is empowered to decide the issues” and is the appropriate forum for the sale.

Minimum Bid

The affiliate of Greenwich, Connecticut-based Starwood will act as the so-called stalking-horse bidder at auction, setting a floor for other offers. Any potential purchaser will have to submit a $250,000 deposit, and initial offers must be at least $165 million, the value of an asset appraisal, court papers show.

The Starwood affiliate bought the company’s $370 million in secured loans in October, according to court documents. It also provided the resort owner with as much as $5 million in financing for the bankruptcy. The committee of unsecured creditors will be allowed to challenge the validity of the lender’s security interests and its right to bid debt.

The resort covers 35 acres, with 3,200 feet of beach frontage featuring 166 “beachfront and blufftop villas,” townhouses, four restaurants and a water-purification plant. As of October, the company had buyers lined up for 70 percent of the residences, which sell for as much as $6.5 million, according to court papers.

The project was expected to take two years to complete when construction began in 2005, at an estimated cost of about $144 million. Expense projections more than doubled by January 2007 to $327 million, according to court documents. Labor disputes and Hurricane Omar further delayed construction on the resort, which opened in October.

The case is In re Barnes Bay Development Ltd., 11-10792, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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