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Anguilla: Paradise for Lawyers

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  • May 17, 2011

Before the economic downturn, Anguilla was emerging as the Caribbean’s new rising star with several high profile developments announced and started. The country reached celebrity status with snapshots of Hollywood A-listers on island and Shakira featuring the island in a hit song. Now, with Temenos and Viceroy about to be sold at public auction in the next few weeks and with the recent bankruptcy filing by the owners of Viceroy, the island has become a paradise for lawyers too.

Viceroy Anguilla. The developer of Viceroy Anguilla, Barnes Bay Development, Ltd. and its affiliates, filed for Chapter 11 bankruptcy on March 17, 2011. According to court documents, the construction of the resort, which includes 166 villas, townhomes, and resort residences situated on 35 acres, was originally expected to last two years and cost approximately $144mm. Because of labor strikes, hurricane delays, and various other problems, the construction ultimately cost significantly more, causing the resort to officially open three years behind schedule in October 2010. By that point, the outstanding balance of the loan held by Citigroup was just short of $400mm. In October 2010, Citigroup sold the note to an affiliate of Starwood Capital Group. Additionally, Starwood Capital agreed to provide debtor-in-possession financing and an additional several million dollars to pay unsecured creditors in the event that Starwood is the successful bidder at a public auction for the resort.

On April 18, 2011, the debtors filed an Amended Chapter 11 Plan of Liquidation, which proposed to pay all of the general and trade creditors in full. Under the Amended Plan, purchasers who choose to close on their unit under a new contract will be given full credit for their deposit and additional credits for costs associated with delays in closing. Additionally, in order to entice purchasers to close quickly on their units, the debtor offered a discount off of the original purchase price. The only creditors not made whole under the Amended Plan are purchasers who entered into a purchase and sale agreement for a unit, paid a security deposit, but were no longer willing to close on their unit.

On May 2, 2011, the Official Committee of Unsecured Creditors filed a Complaint for Declaratory and Injunctive Relief to (a) enjoin the developers, et al., from proceeding with or closing on discount offers made to those who submitted a deposit for the purchase of a unit, and (b) prevent any present or future solicitation to purchasers to close on a unit.  The Complaint states that purchasers were offered a discount if they committed to close within forty-five days of receiving the offer notice and quickly executed a new purchase and sale agreement.

The U.S. Bankruptcy Court in Delaware recently scheduled the public auction of the resort to take place on July 27, 2011 in Anguilla. It is expected that the Starwood Capital affiliate will make a credit bid and acquire the resort and that the owner will continue to close units in the near term. The bankruptcy case will continue.

Temenos: The Temenos Resort & Golf Course is a master planned 286-acre resort project developed by Flag Luxury Properties Holdings, LLC, whose principals include Paul C. Kanavos and Robert F.X. Sillerman. The resort includes a completed and open 18-hole Greg Norman golf course, which is currently being operated by Cap Juluca Properties. The project is encumbered by a $140mm first lien credit facility and $40mm second lien credit facility in favor of Credit Suisse. The current outstanding loan amount on both facilities is approximately $159mm. All construction on the project was stopped in June 2008. 

In February 2010, Credit Suisse put the project into receivership after the developer failed to find additional financing. Late last year, the Credit Suisse syndicate began negotiations with Cypress Equities to acquire the asset and complete construction. However, the deal with Cypress fell through when the purchase contract expired in March 2011.

CB Richard Ellis Group Inc. is continuing to market the property and, together with the lender syndicate, have been in discussions with various groups to attempt to put together a deal. Meanwhile, the Credit Suisse syndicate has decided to move ahead with a public auction, scheduled for June 7, 2011. All assets subject to the Credit Suisse mortgage will be auctioned, including a leasehold interest in the completed golf course, and an interest in the partially constructed hotel and residential structures, including a 32-key hotel, 50 one, two, and three-bedroom condominium residences, seven four-bedroom villas, and nine oceanfront estate homes. 

Once the public auction has been completed, all charges subordinate to the senior Credit Suisse loan will be effectively eliminated and, after the high bidder acquires an aliens land holding licence, the high bidder will own the asset free and clear of encumbrances. Although Credit Suisse has a right to credit bid up to its outstanding loan amount, which is significantly higher than the value that prospective buyers have been willing to offer in the past two years, it is unclear whether Credit Suisse will credit bid the property or let it go to the highest third party bidder. Additionally, Credit Suisse could still agree to a private transaction prior to the auction date and postpone the auction.

Either way, the Anguillian government and Anguillians will be happy to see some forward progress with Temenos and, hopefully, all the legal wrangling occurring at both Viceroy and Temenos will lead to a needed cleansing for both projects so that they can be completed and operated sustainably by their new owners.

For more information on Anguilla, please contact Matt Norton at 843.727.2645 or


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