Published On:Tuesday, January 05, 2010

By NEIL HARTNELL

Tribune Business Editor

A US court has approved Credit Suisse's $525 million foreclosure on a $4.9 billion Bahamas-based mixed-use resort project, Tribune Business can reveal, a key step in the plan that will see Ginn enter into a joint venture with the Swiss bank to develop the property.

Documents from the New York State Supreme Court, which have been obtained by this newspaper, reveal that Justice Barbara Kapnick entered the foreclosure and sale order, whereby the Ginn sur mer project in Grand Bahama's West End will effectively be sold at a public auction, on December 23, 2009.

The order stated that Ginn and its financing partner, Lubert Adler, and their relevant subsidiaries had waived their right to defend the action brought by Credit Suisse's Cayman Islands branch, and consented to both the foreclosure and the fact they had defaulted on the loan repayments.

According to the New York court's order, Ginn and Lubert Adler owe Credit Suisse $430.487 million in principal, and $52.634 million in interest till August 20, 2009. From that day on, the interest bill was some $91,404 per day, totalling some $11.974 million as at December 23, 2009.

The order, stating that Credit Suisse had a "good and valid first lien" on the West End, Grand Bahama interests pledged as collateral by Ginn for the original loan, authorised the project's assets to be sold at a public auction.

However, the foreclosure and court order is not as alarming as it sounds, as it is part of the joint venture agreement between Ginn and Lubert Adler on one side, and Credit Suisse on the other, that will see the two work together to develop the Ginn sur mer project.

"What is expected to happen is that Credit Suisse will be the only bidder," a source close to developments confirmed to Tribune Business yesterday. "That's the plan, and Ginn has a joint venture agreement with them."

Once the foreclosure goes through, Credit Suisse will control some 1,600 acres at the West End site, including most of the real estate earmarked to be sold as lots.

Ginn will be left with about 350 acres, Tribune Business understands, most of it in the centre of the project where the largest assets, namely the hotels and casino, are supposed to be located. The development firm will also retain the Old Bahama Bay resort and most of the land around it, plus the airport and golf course.

"Ginn is hoping to do something with those 350 acres on the vertical construction," the source added, indicating the company, which is headed by Bobby Ginn, is seeking to long-term find investors willing to buy-out Credit Suisse.

Tribune Business also understands that the 18-hole golf course has been completed, and that Ginn is "on schedule" with the project, having completed Phase I. The first three years, this newspaper was told, were all about putting in infrastructure.

The New York court order also required the successful bidder for the West End assets to seek the required regulatory approvals from the Government, especially the Investments Board (Cabinet) and the Central Bank of the Bahamas, for the purchase. The required documents are to be submitted to the Government 10 days after the auction.

If approval from the Bahamian government is not received within 90 days from the date of application, the court order says the auction winner will be rejected and a new sale will have to take place.

A 100 per cent equity interest in Ginn-West End will be auctioned, court documents stating that 80 per cent is collectively owned by three of Lubert Adler's real estate investment funds, with the remaining 20 per cent held by a Ginn-owned entity.

In the original lawsuit that gave rise to the foreclosure action, Credit Suisse alleged that the Ginn and Lubert Adler-controlled entities defaulted on their loan repayments on June 30, 2008, and the sums involved "remain owing and unpaid".

Ultimately, Ginn and Lubert Adler, and the Credit Suisse-controlled lending consortium, entered into a Master Restructuring Agreement on December 19, 2008, to deal with the loans and set up the joint venture.

"Pursuant to the Restructuring Agreement, the [Ginn and Lubert Adler entities] agreed that the loans were in default, that the lenders were entitled to foreclose on the West End interests, and that the [Ginn and Lubert Adler entities] have no defence to such foreclosure," the lawsuit alleged.