Paulson's resort group settles with Singapore fund

A group of hotels owned by hedge fund Paulson & Co has reached a settlement with the Government of Singapore Investment Corp (GIC.UL) that the group says will allow it the leeway it needs to come up with a plan to emerge from bankruptcy.

The Singapore fund had been fighting Paulson’s plans for the hotel group, which includes the Doral Golf Resort & Spa in Miami, Florida and four other luxury hotels, and had offered to buy the hotel group just days after it filed for bankruptcy.

 

A bankruptcy court judge on Tuesday approved the settlement, in which the Singapore investment fund agreed to stop its near-term pursuit of the company in return for payments from the Paulson-owned hotels, called MSR Resort.

 

Five Mile Capital, which owns junior debt in the company, was part of the settlement as well.

 

The Paulson-owned hotel group said in court documents it has also had discussions with other creditors including Midland Loan Services, a unit of PNC Financial Services Group (PNC.N), MetLife (MET.N) and the creditors committee about reaching an agreed-upon plan to restructure the hotels.

 

Paulson & Co. bought the hotels from Morgan Stanley (MS.N) in January in a foreclosure auction and then filed for bankruptcy protection for them on Feb. 1, saying that it would use the courts to restructure the hotels and increase their value.

 

If they are worth enough to pay off all the creditors, then Paulson will continue to own the hotels when they emerge from bankruptcy. Indeed, as part of the agreement, the Paulson-owned hotel group has agreed to pay the Singapore government investment fund in full in cash.

 

The fund in turn has agreed to give the hotel group until Sept. 1, 2012, to put a bankruptcy plan in place. If it does not, the hotel group has agreed that it will put the assets up for auction.

 

The hotel group also said it will pay the Singapore fund various fees and expenses and make a US$1 million ($1.26 milliona) payment to it to offset costs associated with the bid for the hotel company.

 

ASKING FOR MORE TIME

Creditors had objected to the Paulson hotel group’s request earlier this year for more time to have the exclusive right to come up with a reorganization plan.

 

In June, a bankruptcy court judge overruled the creditor concerns and granted it an extension, but that extension has since run out.

 

The bankrupt company, which can ask for multiple extensions of its exclusivity right, has already asked the court for its second extension. The extension was initially due to be discussed at a hearing on Tuesday but is now scheduled to be considered by Judge Sean Lane at an Oct. 11 hearing.

 

The case is in Re: MSR Resort Golf Course, U.S. Bankruptcy Court, Southern District of New York, No. 11-10372.