Paulson Group Said to Seize Some CNL Hotels From Morgan Stanley

A lender group including Paulson & Co., the New York-based hedge fund run by John Paulson, seized control of former CNL Hotels & Resorts Inc. properties from Morgan Stanley’s real estate funds through a $600 million debt restructuring, said two people with knowledge of the deal.

The transaction involves the corporate debt used to finance Morgan Stanley’s 2007 acquisition of the hotel owner near the peak of the real estate market. Under the terms of the restructuring, $200 million of corporate debt was extinguished and $400 million was converted into equity, said the people, who asked not to be identified because the information is private.

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