MSR Resort files bankruptcy after foreclosure, loan maturities

By Caroline Salls

Pittsburgh, Feb. 1 - MSR Resort Golf Course LLC filed Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the Southern District of New York.

According to a statement filed by MSR secretary and treasurer and Paulson Co. Inc. affiliate partner Daniel Kamensky, each of the MSR Resort debtors is a wholly owned indirect subsidiary of non-debtor CNL-AB LLC.

CNL-AB is a joint venture consisting of affiliates of sophisticated real estate investors, and the managing member of CNL-AB in connection with these assets is an affiliate of Paulson.

Paulson's primary partner on the MSR assets is a joint venture affiliated with Winthrop Realty Trust.

Foreclosure

Kamensky said the affiliates of Paulson and Winthrop, with other investors, recently became the indirect parent of each debtors following CNL-AB's Jan. 28 foreclosure on 100% of the membership interests in MS Resorts III, LLC.

As the new owner of the MSR debtors, Kamensky said CNL-AB believes there is significant value in the assets and is focused on reorganizing the debtors' businesses, improving the efficiency of the debtors' management and operations, and positioning the assets to better compete with their peer group.

Kamensky said that MSR's previous owners had been attempting to address cash shortfalls and recapitalize the company's debt structure since October 2009.

However, Kamensky said no viable solution was produced by the previous owners and progress had stalled.

In January, Kamensky said CNL-AB reached an agreement with the company's previous equityholders and other corporate mezzanine lenders, under which $600 million of mezzanine debt was eliminated, as was the obligation to pay $200 million of structurally subordinated preferred equity.

As a result of this recent progress, Kamensky said the debtors and CNL-AB are optimistic that they will be able to broker an agreement with MSR's remaining constituencies on the terms of a consensual debt restructuring.

Loans mature

Although CNL-AB cooperated with the previous owners before foreclosure to obtain limited extensions of the maturities of $1.5 billion of loans set to mature on Feb. 1, the company was unable to secure a limited extension of the maturities given its numerous creditor constituencies and the limited timing.

As a result, Kamensky said the company would have been unable to pay all of its debts when due, prompting the bankruptcy filing to preserve the assets.

In connection with the bankruptcy filing, the company requested court approval to use the cash collateral of mortgage lender Bank of America, NA, special servicer Midland Loan Services, Inc. and depositor Deutsche Mortgage & Asset Receiving Corp. to fund its operations on an interim basis through Feb. 14.

Debt details

According to court documents, MSR Resort had $2.2 billion in assets and $1.9 billion of debt at Nov. 30.

The company's largest unsecured creditors include:

• Hilton Hotels Corp., based in Chicago, with a $13.4 million contract claim;

• Miller Buckfire of New York, with an $8.06 million contract claim;

• Marriott International of Bethesda, Md., with a $7.54 million contract claim;

• Specialty Risk Services LLC of Hartford, Conn., with a $4.39 million insurance claim;

• Crowne Point Partners, LLC of Portland, Ore., with a $1.75 million membership deposit claim;

• Amway, based in Ada, Mich., with a $1.46 million advance deposit claim;

• Kerry William Rose & Elizabeth Erene Evers-Rose of Phoenix, with a $1.4 million contract claim;

• Pyramid Acquisition II Management LP of Boston, with a $1.37 million contract claim;

• MS Resort Holdings LLC of New York, with a $1.31 million trade claim; and

• Wyndham Worldwide of North Little Rock, Ark., with a $1.13 million advance deposit claim.

The company is represented by Kirkland & Ellis, LLP.

MSR Resort owns and operates five resorts, including the Grand Wailea Resort Hotel & Spa in Maui, Hawaii; the La Quinta Resort & Club and PGA West in La Quinta, Calif.; the Arizona Biltmore Resort & Spa in Phoenix; the Doral Golf Resort & Spa in Miami; and the Claremont Hotel Club & Spa in Berkeley, Calif.

The New York-based company's Chapter 11 case number is 11-10372.

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