Orb Group negotiations to sell off the U.K. hotels backing its HOTELoC deal are underway. A spokesman at Morgan Stanley confirmed that the deal should reach due diligence by next week at the earliest.

Moody's Investors Services placed the HOTELoC deal under credit watch in early March following a fraud investigation concerning the Orb Group. An investigation by Ernst & Young and Morgan Stanley found an £11 million shortfall in the cash flows. The company also signaled at the time its plans to exit the hotel business.

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