The Tribune

By NEIL HARTNELL

Tribune Business Editor

A "CONSORTIUM" of lenders, rather than Brookfield Asset Management by itself, was last night said to be on course to "imminently" take over ownership of Kerzner International's Paradise Island resort, previous dissent from one of the 'middle' creditors having been quelled.

Sources familiar with developments told Tribune Business that Toronto-headquartered Brookfield had managed to subdue the last bout of opposition to a revised 'debt-for-equity' solution for Kerzner International's $2.5 billion debt woe, reaching a deal with fellow lender ORIX Capital Management.

The latter had successfully stalled moves to solve the lenders' Kerzner debt problem by filing another lawsuit in the Delaware Chancery Court to block Brookfield's last offer, but the dispute is understood to have been rapidly resolved following the action's filing.

Tribune Business was told yesterday that rather than Brookfield taking 100 per cent ownership of Atlantis and the One & Only Ocean Club, as it had originally proposed, in return for forgiving the $175 million worth of debt owed to it alone, the Toronto-based asset manager will now be joined by other lenders in an ownership 'consortium'.

The outcome will be the same, with Kerzner International relegated to a management/brand operator for the two Paradise Island resorts it has spent more than 18 years building up following their acquisition from Resorts International in 1994.

Referring to the ORIX dispute, one well-informed source told Tribune Business yesterday: "There was some dissent from one of the middle lenders, because they did not feel they were getting their fair share.

"Brookfield withdrew their offer and the made a deal with the middle lender. They then went back to Kerzner to take over ownership of the properties."

US attorneys for ORIX had previously revealed that Brookfield had "agreed not to pursue the proposed transaction".

"Under the proposed transaction, Brookfield would have swapped its $175 million in junior interests in the mortgage loan for 100 per cent of the equity of Atlantis and the other properties securing the mortgage, while ORIX and other investors senior in priority to Brookfield would have been forced into a multi-year extension of the mortgage loan," they added.

This was exactly the same argument made by other lenders, Trilogy Portfolio Company and the Canyon funds, which brought down Brookfield's initial debt-for-equity solution to Kerzner International's debt woes.

A key concern for a number of other Kerzner lenders, in relation to the original Brookfield proposal, was that they felt the Toronto-based asset manager - as equity owner - would benefit from the 'upside potential' of Atlantis and One & Only Ocean Club, especially if tourism and the world economy improved, cutting them out.

The revised 'debt-for-equity' deal brings a number of other lenders in on the equity side, thus allowing them, too, to benefit from any improvement in the Paradise Island properties' profitability.

'It's Brookfield and a consortium of other lenders," Tribune Business was told by a source yesterday, "rather than Brookfield itself. Part of the work-out with the senior lenders was to involve them in some form with the upside."

Brookfield is likely to be the controlling lender in the consortium, and is highly likely, as Tribune Business has previously reported, that Brookfield or whoever takes control will seek to 'flip' the Paradise Island resorts to another buyer as their exit strategy, probably before Baha Mar opens in 2014.

It is unclear how close the revised Brookfield-led proposal is to being consummated, although there were several unconfirmed suggestions that the matter was before Cabinet yesterday.

Andrew Willis, Brookfield's spokesman, declined to comment when contacted by Tribune Business, but George Markantonis, Kerzner International (Bahamas) managing director and president, said he believed a solution to the lender squabbles was "imminent".

"It's imminent and could happen at any time, but I've heard that before," Mr Markantonis said. "I wouldn't be surprised if we get some news very shortly, but I just don't know where it is with Brookfield and the Government right now."

Looking forward to the prospects for a resolution, Mr Markantonis added: "I think that'll be good news if that occurs, as we can focus on what we do best, which is hospitality."