UPDATE 2-Kerzner transfers Atlantis resort to Brookfield

NASSAU, Bahamas, Nov 29 (Reuters) - Kerzner International Ltdunveiled on Tuesday a debt-for-equity restructuring that will transfer ownership of its Atlantis mega resort in the Bahamas to a Toronto real estate and asset management company.

The resort owner and operator, which has been locked in negotiations with lenders over its $2.6 billion debt for some time, said in a statement it was transferring equity ownership of Atlantis and its One & Only Ocean Club properties in the Bahamas, plus the One & Only Palmilla in Mexico, to Brookfield Asset Management Inc .

Brookfield is exchanging $175 million worth of Kerzner International’s debt in return.

The deal effectively transforms Kerzner International into a resort management company, as opposed to its previous status as an owner-operator.

It will continue to manage the Atlantis and two One & Only properties for Brookfield, and focus on growing both brands worldwide.

Kerzner International chairman and chief executive Sol Kerzner said: “This transaction will permit Kerzner to move forward as a management company, allowing us to get back to what we do best -- designing and managing world-class destination and luxury resorts under the Atlantis and One & Only brands.”

Kerzner International will continue to own rights to both brands and Kerzner said Brookfield and the company were in agreement to maintain employment levels at the two Bahamian resorts, along with marketing and capital investment.

Kerzner said the agreement, which requires Bahamian government approval, would “substantially reduce our debt and streamline our balance sheet and operating structure.”

The restructuring is expected to close by 2011 year-end.

Bahamas Prime Minister Hubert Ingraham said he met representatives of both companies and had been assured Brookfield shared Kerzner’s commitment to investing in the property and ensuring its viability.

Kerzner is the largest private sector employer in the Bahamas, with nearly 8,000 workers, or 5 percent of the Atlantic islands’ labor force.

“Kerzner International, which first entered The Bahamas as Sun International in 1994 at a low point in our tourism performance, has been overwhelmingly responsible for the revitalization and expansion of the Bahamian tourism sector,” Ingraham said in a statement to Parliament.

He said the Bahamas government had “excellent” relations with Kerzner and “we likewise look forward to a strong working relationship with Brookfield.”