Financial rescue for Atlantis resort on the rocks
NASSAU, Bahamas, Thursday January 19, 2012 – Just over a month after announcing to the Bahamian people that the Atlantis resorts had been rescued from bankruptcy, Prime Minister Hubert Ingraham had to announce yesterday (January 18) that the deal was off.
However, in a Press conference, the Bahamian leader tried to assure his people that the fate of Bahamas’ single largest private sector employer was not as dire as it seemed.
“We do not know precisely what these seven lenders are going to agree. At the moment, the property is still owned by Kerzner, Kerzner is still managing the property, there has been no change, no jobs have been lost. Atlantis is having a far better season now than it had last year, its bookings going forward are very good for the year.
“There is no need for any concern at the moment. The lenders themselves would like to collect their money back. In order for them to collect their money back, it is important for Kerzner’s property on Paradise Island to be successful – it is not in the lenders’ interest for it not to be successful because otherwise they would not get their money back,” stated Ingraham.
The uncertainty surrounding the Atlantis resort has come as a result of Brookfield Asset Management cancelling its agreement to exchange debt to acquire Kerzner International Holdings Ltd’s Atlantis resort in the Bahamas. This deal would have wiped out US$175 million in debt that Kerzner owed Brookfield. However, this was only a small portion of Kerzner’s overall multi-billion dollar debt obligation and other creditors have stepped in to stop Brookfield.
“Two hedge funds [Trilogy Portfolio Co. and Canyon Value Realization Fund LP] got a temporary restraining order on Friday and, as a result of that, we have terminated the offer to acquire,” explained Andrew Willis, a Brookfield spokesman. “We’re reviewing all options,” he added.
This move by Brookfield follows a temporary restraining order granted last Friday by Judge Donald Parsons of Delaware's Chancery Court against Brookfield’s takeover of the huge Atlantis resort in the Bahamas from Kerzner International until he could hear arguments for a preliminary injunction on January 27.
The judge noted that the deal would prevent investors holding senior loan positions from gaining equity in the Atlantis resort and would deny them potentially lucrative returns if the resort enjoyed a healthy recovery.
The properties Brookfield planned to take over had about US$2.6 billion in debt when negotiations began. That would have shrunk to about US$2.3 billion, with Brookfield’s forgiveness and an earlier US$100 million payment that was part of a maturity extension.
The Kerzner loan has been on the brink of default since 2008 when the global economic slowdown hit the performance of the Atlantis resort, which has 3,400 hotel rooms and features the world's largest open-air marine habitat.
Other holders of the loan feared that the takeover by Brookfield, which held the junior-most portion of the loan, could give Brookfield leverage if it were to use bankruptcy to restructure the borrowings and on January 4, the court action was initiated against Brookfield in Delaware Chancery Court in Wilmington with the complainants accusing the Canadian property company of “brazen self-dealing” and seeking an order to stop the transaction and asking for unspecified damages.