Atlantis owners to refinance debt

Thu, Jan 12th 2012, 08:42 AM

The arrangements associated with the takeover of Kerzner International's Paradise Island properties call for the new owners to refinance Kerzner's $2.1 billion loan within the next two years, The Nassau Guardian has confirmed. Kerzner's failure to make payments relative to the loan prompted one of its lenders, Brookfield Asset Management, to take over Atlantis, the One&Only Ocean Club on Paradise Island, as well as its Mexican property.
There are growing concerns in the business community over the ownership change and the implications it could have for economic activity.
The Nassau Guardian understands that the government does not see Brookfield as a suitable fit for Atlantis.  The Canadian conglomerate has no experience in owning hotels; however, it has entered into a four-year agreement with Kerzner to manage Atlantis.
Amid lingering concerns about the implications of the ownership change, The Nassau Guardian has continued seeking details in the matter as many people wait to see whether the management agreement between Kerzner and Brookfield will be made public.
Kerzner had various lenders but Brookfield was the smallest.
According to a Guardian source, Chairman of Kerzner International Sir Sol Kerzner was blindsided in his months-long bid to keep the properties under the ownership of Kerzner International.
Sir Sol had reportedly been confident that he could prevent the takeover because he thought he had support of shareholders in his attempt to secure new funding.  However, board members out voted him.
It has also been suggested that he felt disappointed after he was unable to get the support of important investors.
Although Prime Minister Hubert Ingraham and Sir Sol have both said that the nearly 8,000 jobs on Paradise Island are not at risk, many employees are jittery over the development -- particularly as a formalized deal between Kerzner, as manager, and Brookfield, as owner, has not been made public.
The expectation is that Brookfield's immediate concern will be to sell the assets.
Earlier this week, The Nassau Guardian reported that job security on Paradise Island is tied to certain high revenue targets that Kerzner will be required to meet in an environment of ongoing global economic uncertainty.
It is understood that Brookfield expects that higher rates will help Kerzner achieve the new revenue targets.  The Ingraham administration believes that the former government erred when it allowed the Paradise Island properties to be used as collateral for mortgages held overseas.
Over the last several days, the Democratic National Alliance (DNA) has called on the government to come clean about the details of the Atlantis takeover and has asserted that jobs are at risk.
"The management agreement between Kerzner and the new owner can be terminated at any time with penalty and even requires Atlantis to increase profits by about 20 percent each year in an (environment) described by the prime minister as a time of global economic and financial uncertainty," DNA leader Branville McCartney said earlier.
Kerzner will not be able to meet these high targets unless staff cuts are made and operating costs are cut, McCartney believes.
Brookfield is taking over the Kerzner properties in a $175 million debt for equity swap.  Developments relating to the ownership change are being closely watched in many circles as Kerzner International is the country's largest private employer with an annual payroll of approximately $189 million.

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