Nov. 20 (Bloomberg) -- Scrub Island Development Group Ltd., the owner of a British Virgin Islands luxury resort, sought bankruptcy protection to end a receivership it claims was secretly put in place by its lender.
The company listed debt and assets of more than $100 million each in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Tampa, Florida, where it is based.
Scrub Island Development Group owns the island and resort of the same name nestled into the side of the smaller of two halves of a 230-acre private island connected by a narrow strip of land. It’s the first resort development built in the British Virgin Islands in more than 15 years, according to its website.
FirstBank Puerto Rico, the company’s lender, is owed about $108 million, according to court documents. FirstBank initiated a “highly secretive appointment” of a temporary receiver of the Scrub Island Development Group’s assets without prior notice to the company or its lawyers, the resort operator said in court papers.
The bank’s request was granted on Nov. 1 by the Eastern Caribbean Supreme Court in the High Court of Justice, according to court documents. FirstBank can seek an extension of the court’s ruling at a Nov. 28 hearing, the day after the temporary receivership is set to expire.
To prevent the receiver from damaging its business and to terminate the court order, Scrub Island Development Group sought bankruptcy protection and said in court filings that it will pursue a lawsuit against the bank for claims including breach of contract, civil conspiracy, and unfair and deceptive trade practices.
The company said the bank engaged in unauthorized contact with an executive at affiliated company Mainsail Lodging & Development and obtained confidential information from the executive, who was later terminated, according to court documents. The executive isn’t identified in the filing.
Josias N. Dewey, a lawyer for FirstBank Puerto Rico, didn’t immediately return a phone call seeking comment on the resort company’s allegations.
Mainsail Lodging & Development’s president, Joe C. Collier III, became involved in the design and development of Scrub Island in 2005, according to court papers. Mainsail, which has the same address as Scrub Island Development Group and whose president signed the company’s bankruptcy petition, was contracted as the exclusive and sole developer and operator of the resort.
Mainsail Management Group is the biggest unsecured creditor, owed about $1.5 million, and its affiliates are also four of the other top 10 unsecured creditors.
Scrub Island Development Group said in court papers current assets are on the books for about $2 million and non-current assets had a book value of $124.3 million, while an affiliate that also filed for bankruptcy has assets worth about $10.6 million.
The resort has 52 guest suites ranging from about 350 square feet to about 1,600 square feet and six two- to four-bedroom hillside villas ranging from 3,000 square feet to 6,000 square feet that include private chefs and attendants on request.
In addition to its three private beaches, the amenities include a four-tiered lagoon pool with waterfalls and swim-up bars, a 6,000-square-foot spa, three restaurants and a 55-slip marina that has five docks for yachts of as long as 170 feet, according to its website.
Christopher Columbus encountered the island in his travels and legend has it that the isle received its name from pirates who used to stop by to scrub the barnacles off their ships, the resort says on its website.
The case is In re Scrub Island Development Group Ltd., 13-15285, U.S. Bankruptcy Court, Middle District of Florida (Tampa).
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