Bloomberg News

Brookfield Cancels Agreement for Kerzner’s Atlantis Resort

January 17, 2012

(Updates with details from complaint in last three paragraphs.)

Jan. 17 (Bloomberg) -- Brookfield Asset Management canceled its agreement to exchange debt to acquire Kerzner International Holdings Ltd.’s Atlantis resorts in the Bahamas.

“Two hedge funds got a temporary restraining order on Friday and, as a result of that, we have terminated the offer to acquire,” Andrew Willis, a Brookfield spokesman, said today in a telephone interview. The funds are Trilogy Portfolio Co. and Canyon Value Realization Fund LP. “We’re reviewing all options.”

Kerzner in November agreed to hand ownership of its flagship property to Brookfield, a Toronto-based investment firm, as part of a debt restructuring. Brookfield at the time planned to forgive $175 million of junior debt for ownership of the Bahamas-based Atlantis and the Bahamas One&Only Ocean Club, as well as a half interest in the One&Only Palmilla in Mexico.

Kerzner has struggled with debt since the 2008 financial crisis pushed down hotel values and room rates. The resort -- famous for its Mayan-themed water slides and up-close encounters with dolphins, sharks and rays -- is surrounded by an artificial open-air marine habitat featuring 50,000 sea creatures and a marina to “attract the sleek international mega-yacht set,” according to its website.

The properties Brookfield planned to take over had about $2.6 billion in debt when negotiations began. That would have shrunk to about $2.3 billion, with Brookfield’s forgiveness and an earlier $100 million payment that was part of a maturity extension.

Centerbridge, TPG Capital

Holders of Kerzner’s debt included Centerbridge Capital Partners LLC, TPG Capital, Abu Dhabi Commercial Bank and Fidelity Investments, people familiar with the talks said last year.

Jennifer Ferguson, a Kerzner spokeswoman, declined to comment.

Brookfield’s agreement termination was reported by the Wall Street Journal earlier today.

Investors including Trilogy, of Greenwich, Connecticut, sued Brookfield in Delaware Chancery Court in Wilmington on Jan. 4, alleging “brazen self-dealing” and seeking an order to stop the transaction and asking for unspecified damages. Brian C. Ralston, a Brookfield lawyer, wrote to the court on Jan. 14 that “the proposed transaction has been terminated,” and the case is moot.

The case is Trilogy Portfolio Co. LLC et al, v. Brookfield Real Estate Financial Partners LLC, CA7161, Delaware Chancery Court (Wilmington).

--With assistance from Phil Milford and Dawn McCarty in Wilmington. Editors: Daniel Taub, Christine Maurus

To contact the reporters on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net


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