Sol Kerzner's legacy loses luster under burden of debt load

This is an example of an extreme case. A man whose legacy was forged over decades, will now have an ending that is more salacious than sanguine.

Any titan--whether in business, sports, entertainment--wants to leave on his or her own terms. Take Joe Paterno, the former football coach of Penn State University. The man is considered a living legend, but was summarily dismissed from the school he gave his life to without a proper send off after it was revealed that he did too little when an assistant of his was suspected of sexual misconduct.

We all know about the story. It was cycled over and over again on every news outlet for weeks (still is).

This is an example of an extreme case. A man whose legacy was forged over decades, will now have an ending that is more salacious than sanguine.

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A lifetime of success should be capped by a bottle of Champagne and a joyous send off. Sol Kerzner, the South African hotelier, who built an empire via such known names as Atlantis and One&Only, is a living legend himself in the hotel world.

As we reported last week, Kerzner resigned as CEO of Kerzner International, because he had to. Kerzner's empire was largely pared down earlier this month when it was announced it would be selling off major assets including Atlantis in the Bahamas, as it struggled under an insurmountable debt load.

Africa's Business Day summed it up best: "If ever there was a cautionary tale about the perils of debt-financed private equity, it is being demonstrated by South Africa's "Sun King", Sol Kerzner, whose once huge hotel empire is now being rapidly scaled back under the weight of a $4 billion 2006 buyout."

The hotels will be handed over to the buyout deal’s financiers, Brookfield Asset Management, which agreed to convert $175 million of debt into equity.

It is indeed a cautinary tale. As the saying goes: The chickens are now coming home to roost. Many companies, hotel companies, believed that taking on huge debt would be no problem as forecasts pointed to favorability. As Business Day writes, "The trajectory also reflects the perils of the buyout mania of the late 2000s when strong growth forecasts made high debt burdens seem easily managed."

Now, The Wall Street Journal reports that $400 million in corporate debt will come due next year for Kerzner, and the same amount again in 2013.

Sol Kerzner is a giant in the hotel industry. I'm sure he'd have rather rode off into the sunset under his terms.


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