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UPDATE 3-Arizona Biltmore, 4 other resorts file bankruptcy
February 1, 2011 / 1:46 PM / in 7 years

UPDATE 3-Arizona Biltmore, 4 other resorts file bankruptcy

* Paulson & Co group acquired resorts just last week

* Bankruptcy heads off debt maturity

* Affiliates list $2.2 bln assets, $1.9 bln liabilities (Adds comments from court documents, background throughout)

By Tom Hals

WILMINGTON, Del., Feb 1 (Reuters) - Five U.S. luxury resort hotels, including the Arizona Biltmore, filed for bankruptcy on Tuesday, just days after being acquired by a group that includes affiliates of hedge fund Paulson & Co Inc.

The group put the properties into bankruptcy to head off the maturity of $1.525 billion of debt on Tuesday, according to court documents.

In addition to the Biltmore, the resorts are the La Quinta Resort & Club, a desert oasis once favored by actress Bette Davis; Grand Wailea Resorts Hotel & Spa in Hawaii; Doral Golf Resort & Spa in Miami; and the Claremont Resort & Spa in Berkeley, California.

The Paulson group, known as CNL-AB LLC, plans to use the breathing space of bankruptcy to work on refinancing the debt, which includes a $1 billion securitized mortgage.

The group expects to preserve its ownership, which is often wiped out in bankruptcy when the value of debt overwhelms the value of a company’s assets.

“CNL-AB believes there is significant value in the assets and is focused on reorganizing the debtors’ businesses,” said a court filing by Daniel Kamensky, a partner with an affiliate of Paulson & Co.

CNL-AB also includes affiliates of Winthrop Realty Trust and Capital Trust Inc.

The five hotels have more than 3,000 rooms, 300,000 square feet of meeting space and 14 golf courses.

The resorts were part of eight luxury properties acquired at a foreclosure auction last week. CNL-AB held the corporate-level debt on the properties, and essentially swapped that for ownership.

The eight resorts were purchased by Morgan Stanley Real Estate (MS.N) and other investors in 2007 for about $4 billion, according to court documents.

The three properties not included in the bankruptcy filing are the JW Marriott Grande Lakes and the Ritz-Carlton Grande Lakes in Orlando, Florida, and the JW Marriott Desert Ridge in Phoenix. Debts on those three do not mature until May 2012, according to a source close to the matter.

Altogether, 30 affiliates of CNL-AB sought protection from creditors in Manhattan’s bankruptcy court. The affiliates listed a combined $2.2 billion in assets and $1.9 billion in liabilities.

Paulson & Co has made other real estate investments as the economy begins to recovery. The company joined Blackstone Group (BX.N) and Centerbridge Partners in a $3.9 billion acquisition of Extended Stay, a chain of hotels, which was bought out of bankruptcy.

CNL-AB retained the Kirkland & Ellis law firm and Houlihan Lokey as financial advisers.

The case is In re MSR Resort Golf Course LLC, U.S. Bankruptcy Court, Southern District of New York, No. 11-10372. (Reporting by Tom Hals; editing by John Wallace)

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