Senior lenders in Kerzner International's $2.6 billion mortgage debt have appointed Wells Fargo as special servicer to the loan despite its role in an alleged "sweetheart deal" to seize Atlantis.
The move could indicate an improved relationship between the parties.
Earlier this month, a group of senior lenders attempted to sue Brookfield Asset Management, PCCP and Wells Fargo for allegely engaging in "brazen self dealing" to acquire the Paradise Island properties.
The lawsuit was dropped a few days later after a U.S. judge temporarily suspended the deal, prompting Brookfield to withdraw its offer.
According to U.S. court documents, Wells Fargo played an active role in the events that led to Brookfield acquiring Kerzner's assets in The Bahamas and Mexico in a debt-for-equity swap.
Wells Fargo was appointed as special servicer on the loan by Brookfield just three days before circulating "a draft consent for this transaction in which the box for its consent was already checked off".
"A mere 12 hours later, on the morning of December 12, Wells Fargo circulated its final consent in which the same box was checked off," the court document read.
Top accountant and liquidator Craig Tony Gomez said Kerzner's continued default on the $2.6 billion loan necessitates the presence of a special servicer.
He told Guardian Business the lenders could have assigned someone else, but the fact they haven't shows value is being placed on Wells Fargo's familiarity with the matter.
The lenders will not want the "upward learning curve" that could come into play with a new special servicer, he explained, and Wells Fargo "has a reputation to protect".
"Now that Brookfield has backed off, Wells Fargo will treat the situation fairly," Gomez said, who is also the managing director at Nassau's baker Tilly Gomez. "This is not unusual for American practices. Wells Fargo was already there and it makes sense."
While Wells Fargo has been brought on as special servicer, it is unknown if the maturity date for the loan has been extended to accommodate negotiations.
On January 13, this newspaper exclusively reported a legal battle being waged between Brookfield and senior lenders of Kerzner International.
From the time the loan went into default last spring until December 8, 2011, Brookfield acted as special servicer to administer the loan for all lenders.
"Not withstanding this, and in breach of contractual and legal duties they owed to plaintiffs and other lenders and participants, they have negotiated a sweetheart deal principally for their own benefit," the document stated.
Wells Fargo, brought on as special servicer on December 8, approved an extention of the final maturity for the loan to December 20, 2011 "without ever seeking, let alone obtaining, the consent of plaintiffs and other junior participants".
A further extension was granted by Wells Fargo not long thereafter to January 6, 2012.
The plaintiffs alleged Brookfield and Wells Fargo then worked with PCCP, the second most junior lenders, and leveraged its powers as "directing holder and controlling holder" to sign off on the asset transfer.
Last November, Guardian Business attended the press conference when Sir Sol Kerzner, the founder of Kerzner International, announced he would exchange $175 million of debt for Atlantis on Paradise Island, The One&Only Ocean Club and the One&Only Palmilla in Mexico.

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