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Wed 30 Nov 2011 07:30 AM

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Atlantis Dubai sidestepped in Kerzner debt revamp

Kerzner hands over flagship Atlantis Bahamas to Brookfield in $175m debt deal

Atlantis Dubai sidestepped in Kerzner debt revamp
Kerzner built the Atlantis resorts in Dubai and the Bahamas

Kerzner International Holdings,
the company that built Atlantis resorts in the Bahamas and Dubai, handed
ownership of its flagship property to Brookfield Asset Management as part of a
debt restructuring.

Brookfield will forgive $175m of
junior debt for ownership of the Bahamas-based Atlantis and the Bahamas
One&Only Ocean Club, as well as a half interest in the One&Only
Palmilla in Mexico, according to a statement obtained by Bloomberg News.

Kerzner, which also reached a deal
with lenders to restructure its operating debt, will continue to run Atlantis
Paradise Island and the One&Only resorts, according to the statement.

Atlantis the Palm, in Dubai,
jointly owned with Dubai World, isn’t affected. Kerzner in August was reported to
be in talks to sell its 50 percent stake in the resort to Istithmar
World, Dubai's investment arm.

Famous for Atlantis’s Mayan-themed
water slides and up- close encounters with dolphins, sharks and rays, Kerzner
has struggled with debt since the 2008 financial crisis cut hotel values and
room rates. The company has negotiated to extend maturities on mortgages due
earlier this year, people familiar with the talks said in August.

The properties being taken over by
Brookfield had about $2.6bn in debt when negotiations began a year ago. That
shrinks to about $2.3bn, with Brookfield’s forgiveness and an earlier $100m payment
that was part of a maturity extension.

Kerzner is working with Brookfield
to extend maturities of the remaining debt, according to two people familiar
with the negotiations who declined to be identified because the arrangement
isn’t public.

“This transaction will permit
Kerzner to move forward as a management company,” chairman and chief executive
officer Sol Kerzner said in the statement. The deal allows “us to get back to
doing what we do best - designing and managing world-class destination and
luxury resorts under the Atlantis and One&Only brands,” he said.

Kerzner was taken private in 2006
for $3.6bn by a group led by the namesake founder Sol Kerzner. Owners include
Dubai World’s Istithmar, Goldman Sachs Group’s Whitehall Funds and Colony

Holders of Kerzner’s debt included
Centerbridge Capital Partners, TPG Capital, Abu Dhabi Commercial Bank and
Fidelity Investments, people familiar with the talks said earlier this year.

Kerzner, 76, built what his
company website calls the “mythical city of Atlantis” on Paradise Island
property he bought from Merv Griffin, the late talk show host and game show
creator. The resort is surrounded by an artificial open-air marine habitat
featuring 50,000 sea creatures and a marina to “attract the sleek international
mega-yacht set,” according to the site.

A $1bn expansion begun in 2007
added hotels, a new dolphin habitat and expanded the Aquaventure water park.

In September 2008, as the
financial crisis deepened, Kerzner opened a second Atlantis in the Gulf on the
outer frond of Palm Jumeirah, Dubai’s man-made, tree-shaped island.

Kerzner also runs seven
One&Only resorts, with different levels of property ownership. Today’s deal
doesn’t impact the other five.

Brookfield Asset Management is a
Toronto-based investment firm that manages about $150bn and focuses on
property, infrastructure, renewable power and private-equity investments.

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