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Brookfield: Everything is still on the table

Pull out fuels mounting uncertainty as leaders fear backlash in the economy and urge the government to step up
  • Bruce Flatt, Brookfield CEO. File photo

Guardian Business Editor

Published: Jan 18, 2012

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Brookfield Asset Management’s pull out in the landmark debt-for-equity swap with Kerzner international has been met with a daunting list of questions.

The only thing that is certain, according to top business leaders, is this roller coaster ride is destructive for business.

The jolting turn of events leaves Paradise Island in limbo as creditors must return to the table and continue the restructuring of Kerzner’s $2.5 billion in mortgage debt.

Andrew Willis, senior vice president of communications and media at Brookfield, said the Canadian firm decided to walk away after a U.S. judge issued a temporary restraining order on the transaction.

“As a result, we decided to terminate the offer to acquire the properties,” he told Guardian Business. “We just made the decision in the moment based on the court’s decision.  Now we are reviewing our options.”

When asked if Brookfield is no longer interested in pursing Kerzner’s assets in The Bahamas and Mexico, Willis said “everything is on the table”.

On Friday, this newspaper exclusively revealed a legal battle being waged in the U.S. between Brookfield and senior lenders in Kerzner’s $2.5 billion mortgage debt.

Senior lenders are suing Brookfield, the Canadian conglomerate, to stop what they called “brazen self-dealing” that resulted in the apparent acquisition of Kerzner International’s assets in The Bahamas and Mexico on November 30 - Atlantis, the One&Only Ocean Club and the One&Only Palmilla.

The plaintiffs alleged, among a variety of complaints, that Brookfield colluded with junior lender PCCP and special servicer Wells Fargo, exploiting certain administrative powers to carry out the transfer of assets without approval and in violation of the loan agreement.

In response to the pull out, business leaders renewed calls for the government to take a more leading and transparent role in the negotiations.

Franklyn Wilson, the chairman of Sunshine Insurance and Arawak Homes Inc., said the situation has created a “major uncertainty”.

“Clearly the government must say something to explain its role in this matter.  I say this because, as I recall on Jan. 4, Zhivargo Laing [the state minister of finance] made a public statement on the record that he had not been following it, but was confident everything would work out,” Wilson said.  “So, that raises the question as to whether or not the minister was really oblivious to what was happening, as it would seem to suggest, or if he knew what was happening and misled the public.”

Wilson expressed concern about the ramifications of the investors’ squabble on the overall economy of The Bahamas.

“It is in the national interest that the government do what it can to try and contribute to the removal of this uncertainty in the fastest possible time.”

Winston Rolle, the chairman of the Bahamas Chamber of Commerce and Employers Confederation, felt one of the gravest concerns was indeed the international perception of the country.  While he remained confident the property will likely continue business as usual amid the legal squabble, the fact that the matter has received so much public attention could negatively impact the country’s most coveted tourism product.

“What will this do to future bookings?” he asked.  “People might not want to book out of concern for the prospect of the property’s future, especially when you consider the importance of group bookings.  Will they book without knowing what the status of the property might be?”

Kerzner International is the largest private sector employer in The Bahamas.

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