Grand Wailea Hotel bankruptcy on Maui, Morgan Stanley real estate fund foreclosure, managed by Hilton Hotels under a long-term contract.
As clock expires, new owners of Grand Wailea file for bankruptcy
By Harry Eagar, Staff Writer
reprinted courtesy Maui News 2/2/11
At the close of business Tuesday in New York, the new owners of the Grand Wailea ran out of time to restructure $1.5 billion in debts and filed for bankruptcy.
As usual in this kind of bankruptcy, the businesses will continue to operate while the debtors and creditors duke it out in the Southern District of New York.
The filing was actually a coordinated submission of 30 petitions in this complex financial deal.
Last week, Paulson & Co. and its associates, who had foreclosed on a Morgan Stanley real estate fund and its affiliates, used credit to buy up the properties at auction.
They got eight properties, of which the Grand Wailea and four others were pledged for two loans of $1 billion and $500 billion that came due Tuesday.
According to Bloomberg News, the bankruptcy papers stated that the big five were valued at $2.2 billion in November and had $1.9 billion in debt.
Although not making enough on operations to pay debts, the Paulson group expects the properties to work their way into the black and recover capital value as the visitor industry returns.
Thus, the new owners have been working to extend and restructure the senior debt (and other debts) the properties are carrying.
Bloomberg quoted a statement from Paulson's Michael Barr saying: "We and our partners are excited to be owners of some of the world's most desirable resorts and look forward to providing new sponsorship to maximize the value of these irreplaceable assets."
The Grand Wailea is managed by Hilton under a long-term contract.
Paulson, a giant hedge fund, Winthrop Realty Trust and Capital Trust Inc. had foreclosed on a Morgan Stanley real estate investment trust. It is protecting five resorts by filing for bankruptcy. It also gained control of three other resorts, but it has not put them into bankruptcy.
In the bankruptcy filing, Paulson said Morgan Stanley's acquisition of CNL Hotels & Resorts in 2007 was at the peak of the world hostelry market.
The purchase was for $6.6 billion. Most of that has already been written off. Paulson and its allies wrote off another $400 million just last month as part of negotiations to gain control. Now that they have it, it will cost them more to keep it.
* Harry Eagar can be reached at heagar@mauinews.com
reprinted courtesy Maui News 2/2/11, original link http:// mauinews.com/page/content.detail/id/545710/As-clock-expires--new-owners-of----.html
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