A lender group including hedge fund Paulson & Co took control of former CNL Hotels & Resorts Inc properties from Morgan Stanley's real estate funds through a $600 million debt restructuring, Bloomberg said on Friday, citing two people with knowledge of the deal.
The deal involves the corporate debt used to finance Morgan Stanley's 2007 acquisition of the hotel owner near the peak of the real estate market, Bloomberg said. Under terms of the restructuring, $200 million of corporate debt was extinguished and $400 million was converted into equity, the news agency said, citing the sources, who asked not to be identified because the information is private. In addition to Paulson, the lenders are Winthrop Realty Trust, Capital Trust Inc and Morgan Stanley's special property group, the sources told Bloomberg.
The restructuring, completed on Thursday, gave the group control of certain CNL assets, they said. Morgan Stanley's real estate funds have the right to participate in future capital raising, Bloomberg reported the sources as saying. Morgan Stanley, Paulson & Co, Winthrop and Capital Trust were not immediately available for comment. Morgan Stanley bought CNL Hotels for about $6.7 billion. The financing for the acquisition included $1.5 billion of senior debt, $1 billion of mezzanine debt and the $800 million of corporate debt, of which $200 million was previously converted to equity.
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