NEW ATLANTIS DEBT FOR EQUITY SWAP 'MOVING VERY FAST'

By NEIL HARTNELL Tribune Business Editor ONE or more fellow Kerzner International lenders will join Brookfield Asset Management in taking over ownership of the developer's Paradise Island resorts in a revised 'debt-for-equity' swap, Tribune Business can reveal, with a final deal yesterday said to be "very close". While unable to comment on the final form any agreement between the company's lenders would take, given that it was not directly involved in the negotiations, George Markantonis, Kerzner International (Bahamas) president and managing director, told this newspaper that discussions were "moving very fast". Sources familiar with developments, speaking to Tribune Business on condition of anonymity, said at least one other holder of Kerzner International's $2.5 billion debt mountain - likely one of those who opposed the previous arrangement - would join Toronto-headquartered Brookfield on the 'equity' side of a debt-for-equity swap. Brookfield, together with Kerzner International's six other lenders, was said to be working feverishly with their teams of investment banker and legal advisers to complete the terms of an agreement to everyone's satisfaction. Given that Brookfield and the other lender(s) is effectively taking over responsibility from Kerzner International for repaying what is likely to still be a $2 billion-plus sum, a key issue in the talks is to agree terms with the borrowers who will still hold the debt. "They're resolving the matter, and are going to take over Atlantis in terms of a debt-for-equity swap and ownership," a source familiar with developments told Tribune Business. "It's going to be Brookfield and one of the other lenders on the equity side, and they're negotiating terms with the senior lenders." Andrew Willis, Brookfield's spokesman, declined to comment when contacted yesterday, but Mr Markantonis said he expected Kerzner International's lenders would resolve the way forward "soon". "I think they're very close," he told Tribune Business. "I don't have exact dates, but I think it's moving very fast and we should have some kind of resolution soon." Resolving Kerzner International's debt situation, Mr Markantonis indicated, would remove any lingering distractions for the Atlantis and One & Only Ocean Club resorts and their staff, and enable the planned $60-$65 million capital upgrade budget for 2012 to be signed off. "Anything that that takes away from distracting the focus is a good thing," he added. "I'm very pleased with our staff that they've remained focused. We've had a very busy March, and the sooner it gets resolved, the better. "We try not to focus much on things we don't have control over. I don't think it's been a big distraction for our staff. There's a lot more going on in the world right now than this. Our staff have been so busy with huge occupancies and thousands of guests they have not focused too much on the ongoing process." Still, Paradise Island's planned 2012 capital expenditures continue to await an agreement among Kerzner International's lenders. "It hasn't been finalised yet," Mr Markantonis told Tribune Business. "We have to wait for a conclusion of this process. We are talking about, and planning, the capital projects, but want to make sure there's a resolution to the ownership." Brookfield was forced in January to cancel its proposed deal, which would have seen it swap some $175 million in debt owed to it by Kerzner International for 100 per cent ownership of the Atlantis and One & Only Ocean resorts in the Bahamas, and the One & Only Palmilla in Mexico. The deal would have transformed Kerzner International into a resort management company, rather than an owner. Brookfield took its decision after two other 'junior' hedge fund lenders to Kerzner International, in the shape of the Trilogy Portfolio Company, Canyon Value Realisation Fund, Canyon Value Realisation Master Fund, and Canyon Balanced Master Fund, successfully obtained a temporary restraining order from the Delaware Chancery Court that barred Brookfield from closing the deal with Kerzner. Collectively, these lenders are said to hold $112 million or less than 5 per cent of Kerzner International's outstanding debt, so including them in the 'equity' part of any swap - giving them an ownership stake in Atlantis and the One & Only Ocean Club, together with Brookfield - may not be too difficult, once the terms and fine details acceptable to all can be worked out. Tribune Business's sources, though, suggested that overshadowing the talks between the lenders was the spectre of Baha Mar's $2.6 billion Cable Beach development and the involvement there of the Chinese government, and how this might impact their "exit strategy" from Paradise Island. Apart from sorting out the impasse over Kerzner International's $2.5 billion debt burden, which has been in default for almost six months since early September 2011, Tribune Business sources suggested the lending group is also focused on the 'end game' - how they can exit from Paradise Island and recover the full sums owed to them, plus obtain any 'upside' above this amount. Confirming the Baha Mar/China concerns, one source told Tribune Business: "They're [the lenders] very concerned about the Chinese government and Baha Mar, the clout and capital that China brings, and the newness that Baha Mar will have. If they make it into a Beijing, Shanghai, Hong Kong, it'll look pretty nice."

Log in to comment