The Tribune

By NEIL HARTNELL Tribune Business Editor THE BAHAMAS Trade Commission's co-chairman yesterday called for new laws that would allow troubled, debt-burdened Bahamian companies to restructure, pointing out that the only current available options - receivership or liquidation - would be "disastrous" for Atlantis. Raymond Winder, who is also the Bahamas' chief World Trade Organisation (WTO) negotiator, said the absence of Chapter 11-style bankruptcy laws in the Bahamas, which would allow companies to restructure their debts free from the threat of bankruptcy/liquidation, had not aided Kerzner International in its negotiations with the creditors holding its $2.5 billion debt. Speaking just prior to Brookfield Asset Management's confirmation yesterday that it was "terminating" the $175 million debt-for-equity swap with Kerzner International, Mr Winder told Tribune Business: "The reason why Kerzner, Atlantis finds itself in this situation is that we in the Bahamas don't have legislation that allows companies in situations like Kerzner's to go through restructuring while continuing operations. "The only option for Kerzner in the Bahamas [if it cannot reach agreement with its lenders on debt restructuring] is receivership or liquidation. That's the reason why the other side, Brookfield, is going through this process. If we had this legislation, it would deal with all the practical considerations and issues in this kind of transaction." The absence of Chapter 11-style bankruptcy protection laws in the Bahamas, Mr Winder indicated, had also paved the way for the legal action being undertaken by two other 'junior' hedge fund lenders to Kerzner International, who - so far, at least - have successfully stopped Brookfield's proposed takeover of ownership at the Atlantis resort and One & Only Ocean Club. Those two lenders, described as the Trilogy Portfolio Company, Canyon Value Realisation Fund, Canyon Value Realisation Master Fund, and Canyon Balanced Master Fund, had been asking the Chancery Court of Delaware to effectively determine who owned and controlled Kerzner International's Paradise Island assets. Mr Winder indicated the road to these legal manoeveres and disputes had been paved, at least partly, by the lack of protection afforded by Bahamian laws to companies in Kerzner International's situation. He suggested that had the proposed Brookfield transaction been consummated, it would have prevented the situation that emerged at the former Four Seasons Emerald Bay Resort in Exuma. That property, which went into receivership in 2007, ultimately had to be closed until its sale to Sandals because the receivers lacked the financial resources to keep it open and constantly invest in upgrades to the property. "It would have been a disaster if Kerzner had gone into receivership," Mr Winder told Tribune Business. "All you have to do is look at the hotel in Exuma that went into receivership. "The receivers did have the financial resources and wherewithal to invest in the company, which is needed on an ongoing basis. The fact Brookfield was coming in would have been a good thing, because of the vacuum that existed. "The last thing we need is Atlantis going into receivership, foreclosure or liquidation. The point is our laws would have ultimately led to that." Expressing the opinion that "we need it", when asked by Tribune Business whether the Bahamas needed Chapter 11-style bankruptcy protection legislation, Mr Winder added: "When you get an operation like Kerzner's, one cannot afford to have creditors or lenders put it into receivership, which is clearly what any of the creditors could do. "Atlantis was in a very difficult position, and the fact Brookfield was engaged and took a position to prevent that happening was to the Bahamas' advantage. Because we do not have these laws, it leaves the door open for these talks, discussions to take place." Explaining how corporate restructurings worked, Mr Winder said they effectively froze a company's debts, giving it time to work out new arrangements with creditors and restructure sums owed. "What tends to happen a lot of the time in these restructurings is that lenders convert a significant portion of their liabilities to equity, which reduces the burden on the company and gives it a fresh start," he added. "The company cannot do this with the level of debt on its books. If you have someone like Brookfield that has the capital, they're in a better position to deal with these creditors."