Preheat oven to 375 degrees.

Slice the bacon into thirds and wrap it around the whole water chestnuts. Spear with a toothpick. Bake in a grill pan {or a pan with a rack} for 20-25 minutes until the bacon is cooked but not too crispy.

While the wrapped water chestnuts are cooking in the oven, simmer the ketchup and sugar on low for 20 minutes, stirring frequently.

When the water chestnuts are finished cooking, place them on a paper towel to drain. Dip each wrapped water chestnut in the sauce and serve warm.