Lenders in Kerzner International’s $2.5 billion mortgage debt planned to transfer Atlantis to a trust so the property could be appraised and sold off at the best possible price, according to court documents.
The disclosure, included in documents filed this month in the Court of Chancery in Delaware, details the series of events following the dropped lawsuit against Brookfield Asset Management in January. According to ORIX Capital Markets, another lender representing $27 million in the loan, the plan was to sell Atlantis so participants would equally benefit “from sale proceeds in excess of the outstanding balance”.
However, on March 22, ORIX alleged Brookfield reversed course and presented a proposal that “bought the cooperation” of other lenders, allowing the Canadian firm to exchange $175 million in debt for Kerzner International’s assets in The Bahamas and Mexico.
The court filing, the second against Brookfield in recent months, alleged once again a breach in contract and fiduciary duty, intended to orchestrate a deal that eliminates any potential benefit for the other lenders.
These latest court documents claim Brookfield offered to purchase $30 million in bonds to bring about Trilogy’s cooperation. It further alleges it would have “the trust” reimburse $2 million of its legal fees from the property cash flow “to buy Trilogy plaintiffs’ cooperation, with cash that could be used to pay down the outstanding principal of the mortgage loan for the benefit for all participants”.
The maturity date, according to the business plan, would extend the mortgage loan to September 2014.
The company claimed that the most recent complete appraisal occurred in November 2011 by HVS Consulting and Valuation Services, which valued Kerzner’s assets at more than $3 billion.
By exchanging $175 million of debt for the properties, ORIX argued Brookfield stood to “profit handsomely” despite the remaining mortgage debt.
