Preservation of Owners Equity Through A Chapter 11 Filing of Holiday Inn JFK International Airport Jamaica, NY & Crowne Plaza LaGuardia Airport East Elmhurst, NY

The Client

Dilworth Paxson LLP

The Mandate

Two full service hotels, namely the 360 room Holiday Inn JFK International Airport and the 358 room Crowne Plaza LaGuardia Airport were financed via triple tax exempt bonds in the amount of $35 million and $50 million respectively. The bonds were publicly traded and held by various institutional mutual funds. Shortly after September 11, 2001 the properties performance began to falter and by mid 2003 the debt service reserve had been depleted and the properties were on the verge of default. During 2004, the bonds were auctioned and acquired by a conglomerate of hedge funds for roughly 70% of face value.  The new bond holders intended to foreclose on and renovate the assets, with an ultimate goal to sell the properties and achieve significant returns on their investment. Upon the new bond holders having a receiver appointed, ownership defensively filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in an effort to protect its equity in the assets. The bankruptcy case was a highly contested as the new bond holders business plan was to own the properties as opposed to having its debt serviced.

The Results