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Barnes Bay, Viceroy Anguilla Owner, Told to Revise Plan

Barnes Bay Development Ltd., owner of the Viceroy Anguilla Resort & Residences on the British West Indies island of Anguilla, must revise its turnaround plan before its reorganization outline can be approved, a judge said.

U.S. Bankruptcy Judge Peter Walsh in Wilmington, Delaware, today told lawyers for the resort that the revisions were needed after creditors objected to their treatment and demanded more information.

The company’s disclosure statement, the description of the plan, drew about eight objections from creditors who made deposits to purchase units at the resort. The creditors objected to the way Barnes Bay’s proposal split deposit creditors, owed about $52.8 million, into three groups whose recoveries ranged from 15 percent to as much as 50 percent.

“They are picking and choosing” without disclosing the grounds for allocating different recoveries, Donald Detweiler, a lawyer representing one group of deposit creditors, told Walsh at the hearing. He argued that his clients should be in the group receiving a higher payout.

The company’s restructuring plan is based on a July 27 auction with an affiliate of Greenwich, Connecticut-based Starwood Capital Group LLC as the lead bidder. The plan gives all deposit creditors the option of taking cash, closing on a residence with their deposit applied to the purchase price, or pursuing legal action.

Recovery Range

One group would recover 50 percent, a second group 25 percent and the third about 15 percent if they elect to receive cash. Creditors who choose to buy a smaller unit may not get 100 percent of their deposit applied, Charlene D. Davis, a lawyer for another group of the creditors, said.

Should creditors decide to downgrade from their original unit, “the lender reserves the right to deny a purchase if the net price is less than $750 per square foot,” said Kevin Nystrom, Barnes Bay’s chief restructuring officer.

Walsh said the creditors can challenge their classification by July 22. Barnes Bay will have until Aug. 1 to respond.

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.

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.

The Starwood affiliate bought the company’s $370 million in secured loans in October, court documents show. The loan was purchased for between $117 million to $122 million, according to court testimony. It also provided the resort owner with as much as $12.5 million in financing for the bankruptcy.

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

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