Barnes Bay case set for dismissal; attorney fees remain in dispute

By Jim Witters

Wilmington, Del., Nov. 17 - Barnes Bay Development Ltd.'s bankruptcy case will be dismissed as soon as the attorneys for the debtors and for the unofficial committee of unsecured creditors determine the form of order they prefer to be entered.

Judge Peter J. Walsh rejected a bid by the debtors' and creditors' attorneys to recoup fees they are owed for services since Sept. 30. The attorneys said they may appeal Walsh's ruling.

At stake is about $4.1 million of accrued fees.

Walsh said he anticipated a possible appeal and offered three alternatives for the order dismissing the bankruptcy case. He said he could enter an order dismissing the case, but allow proceedings to continue regarding the attorneys' fees; dismiss all elements of the case, except the fees; or he could dismiss the case, leaving authority with the U.S. District Court to reverse his decision and order the case reopened.

The attorneys asked for a delay to consider their options.

Starwood Capital Group affiliate SOF-VIII-Hotel II Anguilla Holdings LLC successfully argued that the budget attached to the final debtor-in-possession financing facility in June capped attorneys' fees at a total of $6.3 million.

Attorneys for the debtor and the creditors said more than $6.3 million had been paid before that deal was struck. They said the cap stood at $11.5 million.

When the attorneys notify Walsh of their preference for the language in the order, Walsh plans to dismiss the case.

The U.S. Trustee's office sought dismissal after Walsh denied confirmation of the debtors' Chapter 11 plan.

The trustee stated that no plan can be confirmed, there is no more money, the debtors are administratively insolvent and the property has been sold.

In July, SOF-VIII-Hotel II Anguilla Holdings bought the Viceroy Resort and Residences in Anguilla, British West Indies. Starwood held the $358 million mortgage on the property.

No one contested the dismissal.

Barnes Bay, the developer of the Viceroy Resort and Residences in Anguilla, British West Indies, filed for bankruptcy on March 17, 2011 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 11-10792.

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