Brookfield terminates Atlantis deal(2)

The Toronto-based asset manager has pulled the plug on an agreement to take over three luxury resort properties in the Bahamas and Mexico from Kerzner International after a Delaware judge granted a temporary restraining order to halt the transaction.

Brookfield Asset Management has canceled a deal to assume ownership interests in Atlantis Paradise Island, a sprawling 2,317-room resort in the Bahamas, as well as two other properties from troubled resort and hotel operator Kerzner International Holdings after other creditors won a court ruling to delay the proceedings.

In a debt restructuring deal last November, Brookfield had agreed to assume full ownership interests in Atlantis and the One&Only Ocean Club in the Bahamas, as well as a half interest in One&Only Palmilla in Mexico, in exchange for forgiving a $175 million loan against the three assets made on behalf of its first Brookfield Real Estate Finance fund in 2006. The debt on the three properties totaled about $2.6 billion when Brookfield and Kerzner began negotiations about one year ago.

Under the agreement, Kerzner would continue to manage the day-to-day operations at the three properties as it shifted its business strategy from that of an owner and operator to a management company.

Earlier this month, other creditors – which include Trilogy Portfolio Company and Canyon Value Realization Fund – filed a lawsuit in Delaware state court to block the closing of the Brookfield deal, arguing that the transaction violated the terms of Kerzner’s loans. On Friday, a Delaware judge issued a temporary restraining order on the closure of the deal until a hearing for a preliminary injunction took place on 27 January.

The ruling “wouldn’t allow us to move forward with the transaction so, as a result, we decided to terminate the agreement,” said Andrew Willis, a Brookfield spokesman. He declined to comment on what would happen with the debt restructuring between Brookfield and Kerzner, saying only that “we are reviewing all options.”

According to an article in the Wall Street Journal, some options include Brookfield and Kerzner placing the assets into a trust while Brookfield proceeds with a formal foreclosure as a junior creditor, or Brookfield striking a deal with other creditors to take over the three resorts.