NEW YORK-MSR Hotels & Resorts, a real estate unit of a John Paulson hedge fund, filed bankruptcy late on Wednesday in response to litigation by a lender that claims it is due millions in connection with a sale of luxury resort properties.

Daniel Kamensky, MSR's treasurer and a partner at a Paulson & Co. affiliate, states in an affidavit that Chapter 11 bankruptcy protection was necessary because of a” baseless" lawsuit filed in April by Five Mile Capital Partners against MSR's directors, according to Reuters.

“The REIT now seeks to end Five Mile's continued terrorization of directors that the court has previously found acted in good faith," he states.

MSR won court approval in February to sell four resorts to the Government of Singapore Investment Corp. sovereign wealth fund for $1.5 billion. The resorts were: the Arizona Biltmore Resort & Spa in Phoenix; the La Quinta Resort & Club PGA West in La Quinta, California; the Grand Wailea Resort Hotel & Spa in Maui, Hawaii; and the Claremont Resort & Spa in Berkeley, California. Five Mile, which states it financed $50 million to an MSR affiliate, accused MSR directors of not securing the best prices for trademarks, logos and other intellectual property. See story at Reuters.