A Morgan Stanley real estate fund will keep the keys to 13 hotels it bought in one of Japan's largest ever property deals after refinancing loans this month, four people with direct knowledge of the matter said. The fund borrowed a combined 225 billion yen ($2.7 billion) in 2007 from Citigroup, Shinsei Bank and other lenders to buy the hotels from airline All Nippon Airways at a peak in Japanese property prices.
It paid 280 billion yen for the hotels but prices have fallen sharply in the wake of the global financial crisis and analysts have said the value of the hotels is well below that of the debt. The refinancing has seen Citigroup withdraw as a lender and Shinsei become the primary lender, taking on Citigroup's portion of the loans as well as those of Aozora Bank, Singapore's OCBC and others, the sources said, asking not to be identified as the information is not public. The original loans matured in April this year, but Morgan Stanley got an extension on repayments until the end of September, they said.
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