Brookfield: Atlantis lender drops lawsuit within hours

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April 05, 2012

Less than two hours after it was filed, ORIX Capital Markets dropped a lawsuit against Brookfield Asset Management alleging the Canadian firm "bought the cooperation" of other loan participants to gain full control of Atlantis. Andrew Willis, senior vice president of communications and media, said the lawsuit "was withdrawn within a couple of hours". Guardian Business has been unable to reach lawyers from ORIX to confirm the dropped case. It was the second time the high-profile acquisition has been before the courts in recent months.

ORIX Capital Markets, holding $27 million in a $2.5 billion mortgage debt, claimed Brookfield won the support of other lenders by agreeing to purchase $30 million in bonds from Trilogy Portfolio Company. Trilogy, including Canyon Value Realization Fund, the Canyon Value Realization Master Fund and Canyon Balanced Master Fund, was the original plaintiff that filed legal action against Brookfield back in January for "brazen self-dealing" and manufacturing a "sweetheart deal" for the property.

According to court documents obtained by Guardian Business, ORIX was suing Brookfield, the most junior participant in the loan, for forcing a near identical deal that would result in a debt-for-equity swap, exchanging $175 million in debt for 100 percent equity in Atlantis, the One&Only Ocean Club, and the One&Only Palmilla in Mexico. ORIX also claimed Brookfield planned to orchestrate a three-year extension and restructuring of the mortgage loan in ways that violate governing agreements and compromise the rights of other lenders.

The documents, filed in the Court of Chancery of the State of Delaware, alleged Brookfield, along with special servicer Wells Fargo, circulated to ORIX and other lenders an "Asset Business Plan" last month that described the "same transaction as previous restrained by this court". "This time, however, defendants have apparently bought the cooperation of the original Trilogy Action plaintiffs by agreeing to purchase $30 million in their bonds at par," the document said. Since the last legal battle in January, ORIX also alleged "there have been no efforts to market the property to obtain the highest and best value or to provide a market check on the hairiness of the proposed Brookfield transaction".

ORIX alleged Brookfield has rejected its objections to the deal. The lender said the Canadian firm intended to proceed with transaction despite these objections by claiming that time was a "critical factor' in executing the plan. ORIX accused Brookfield and Wells Fargo of a breach in contract and a breach of fiduciary duty. It sought to block the deal and maintain "status quo", preventing ORIX and other lenders from "forever losing its bargained for rights". This latest development in the Kerzner restructuring saga casts further uncertainty on the largest employer in The Bahamas. Last November, Guardian Business attended a press conference when Sol Kerzner, the chairman and CEO of Kerzner International, announced the transfer of ownership to Brookfield Asset Management, a Toronto-based firm with assets valued at more than $150 billion.

Under a debt-for-equity deal, Kerzner would have received a management contract for Atlantis and the One&Only Ocean Cub. In January, the deal was derailed when junior lenders filed legal action against Brookfield for orchestrating a "sweetheart deal". Later that month, the case was dropped when Brookfield withdrew the offer and returned to the bargaining table.

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News date : 04/05/2012    Category : Business, Nassau Guardian Stories

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