MSR Resort Creditors Object To Chapter 11 Plan, $1.49B Stalking Horse Deal

by Tara Arick on February 27, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

A group of creditors that invested in bankrupt MSR Resort Golf Course LLC on Feb. 25 filed an official notice of appeal of the order issued by the U.S. Bankruptcy Court for the Southern District of New York approving the resort’s Chapter 11 plan and $ 1.49 billion asset sale (In Re: MSR Resort Golf Course LLC, No. 11-10372, S.D. N.Y. Bkcy.).

Stalking Horse

MSR filed for Chapter 11 bankruptcy on Feb. 1, 2011.

On Sept. 24, 2012, the bankruptcy judge presiding over the case approved a stalking horse bid of $ 1.49 billion offered by Government of Singapore Investment Corp (GSI).

GSI made the bid based on the fact that it has a long history of lending to MSR. The bid took into account GSI’s $ 110 million second mezzanine loan and its $ 250 million third mezzanine loan to MSR.

Restructuring

On Feb. 22, Bankruptcy Judge Sean H. Lane approved MSR’s plan.

The bankruptcy judge said that MSR’s preference from the beginning was to structure its restructuring as a reorganization or equity sale to present the best recovery to all stakeholders. As a result, MSR worked with potential plan sponsors to finalize the terms of a potential new money investment as part of a reorganization or equity sale and, in consultation with their financial adviser, engaged in discussions with dozens of potential new money investors, including MSR’s current indirect equity owners and Five Mile Capital Partners LP.

Five Mile filed a notice of appeal but gave no explanation of the specific points on which it objects.

Bid

The bid also included a binding commitment from United Overseas Bank Ltd. for $ 828 million, as well as a pledge of financing from a group called the GSI RE Mezz Lenders for $ 310 million.

The $ 1.49 billion bid provides an infusion of cash that will make it possible for MSR to pay most creditors in full, according to the amended plan.

Creditors holding allowed administrative claims and debtor-in-possession claims are scheduled to receive payment in full in cash under the terms of the amended reorganization plan.

Loan Claims

Moreover, creditors with mortgage loan claims, which total $ 857.7 million, will receive 100 percent recovery under the amended plan.

Two hotel companies, Marriott International Inc. and Hilton Worldwide Inc., are slated to receive full recovery on their claims. Marriott’s debt was subject to confidential settlement, so the amount of recovery has not been made public. In the case of Hilton, MSR had an outstanding debt of $ 123.7 million, which the hotel company will now receive in full.

Plan Features

Other features of MSR’s amended plan include:

* Holders of first mezzanine loan claims will see full recovery on their $ 115 million in claims.

* Second mezzanine lenders will receive 100 percent on their $ 116 million in claims.

* Third mezzanine lenders will get 100 percent on their $ 264 million in claims.

* Fourth mezzanine loan claims will be canceled.

* General unsecured claim holders with between $ 6 million and $ 7 million in claims will get 100 percent recovery under the plan.

* Intercompany claims, subordinated securities claims and interests will be canceled.

MSR is represented by James H.M. Sprayregen, Paul M. Basta, Edward O. Sassower and Chad J. Husnick of Kirkland & Ellis in New York. GSI is represented by Michael J. Sage, Brian E. Greer and Nicole B. Herther-Spiro of Dechert in New York.

Five Mile is represented by David M. Friedman, Adam L. Shiff and Robert M. Novick of Kasowitz Benson Torres & Friedman in New York.

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