Dubai Atlantis in red as Kerzner seeks sellout

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Atlantis resort complex Dubai
The Atlantis resort complex in Dubai. Photo: EPA

Kerzner International Holdings, the multi-billion dollar investment entity that owns the extravagant Atlantis chain of hotel resorts, may sell off its 50% stake in the Dubai branch that is located at the heart of the exquisite man-made Palm Jumeirah Island.

The bid already has a primary contender in Istithmar World, Dubai?s investment arm that currently owns the other half of the investment stake in the deluxe Palm Dubai getaway.

Speculation of the move comes as Kerzner, founded by the South African business tycoon Sol Kerzner who initially capitalized success as a casino-owner, hit a rough patch in its finances, accumulating a gargantuan pile of mortgage debt estimated to be worth as much as $2.6 billion, which threatens to push the holdings conglomerate into a default, and possibly even foreclosures of its world famous resorts. In order to avert the crisis, Kerzner must restructure its massive heap of debt and extend its debt maturities ahead of a September 9 deadline that precariously waits just around the corner.

Selling off its stake in the Atlantis Dubai would help the luxury resort operator salvage as much as $350 million in order to finalize a debt restructuring deal critical for the company to pull through the credit crunch, sources within the company told the Wall Street Journal.

While the amount would far from appeasing the woes of the owner of the famous One & Only?s chain of boutique luxury resorts, it could enable the holdings company to brush off some of the pressure thrust on it by its rattled creditors who are demanding higher principals in exchange for debt extensions.

However, the proceeds from the sell-off of Dubai Atlantis will primarily be used by Kerzner to secure its Bahamas counterpart whose mortgage expires on September 9, insiders further told Wall Street Journal.

Located?in the heart of?Paradise Island, the Atlantis Beach Tower is one of most popular luxury getaways in North America, indicating why Kerzner could be so eager to maintain its investment in its Bahamas venture.

Nevertheless, even though the financials of the Atlantis Dubai, which opened its doors a decade later than its Bahamian namesake, are not publicly shared by the private limited company, those closely involved in operations claim that it seems to faring relatively better than the Paradise Island resort, which is reportedly suffering from a decline in occupancy rates and lower-than-expected profits.

The state-run Istithmar World, that recently underwent a restructuring of its own $1 billion mortgage debt, may find it difficult to cough up the exorbitant sum that would be required to purchase Kerzner?s stake.

Furthermore, the future prospects of the Dubai Atlantis remain largely blurred, especially since, on the one hand, political tensions and civil unrest within the region coupled with a depressed global economic climate pull down demand for luxury hotels, whereas on the other a notable boom in Dubai?s tourism industry that recently saw it ranked number one in the region and among the top ten in the world simultaneously propel it forward.

Sources: Wall Street Journal

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