Lenders – Book a Return of Capital from Hotel Debtors

As the Pandemic’s strong grip gets tighter and tighter, we have been fielding a lot of calls from lenders with hotel debtors. How can they recoup their principal when the courts are swamped and travel restrictions persist?

Move Fast (the opposite of COVID-time)

In our two decades of professional experience representing lenders with troubled loans, we’ve learned that the best outcomes generally result from early action. Receiverships typically are the avenue of choice for hotel properties, given the opportunity to improve operations and generate cash flow while a sale process is designed and implemented.

But, nothing is normal in 2020:

• Receiverships:  Over-burdened courts are pushing out hearing dates. Every day of delay increases the lender’s risk of losing principal.
• Bankruptcy:  An obvious choice for debtors today, bankruptcy allows them to write off liabilities and get a fresh start when the economy picks up. But, it usually is the worst option for lenders.
• Restructuring:  A CRO experienced in the hotel industry may be the best option for most special asset situations today. Avoiding the courts allows for quick action to optimize cash flow and put an exit plan in place for the lender’s benefit.

Our proven processes optimizing the return of principal to lenders from non-performing hotels blend our deep knowledge of turnarounds, receiverships, operations, the hospitality industry and economic disruptions.

Results Matter – Sample Hotel Experience

Interim Management / Financial Advisory 
Lender’s 4-Hotel Portfolio in Workout

• Surveyed 4 hotels in workout
• Negotiated settlement agreements
• Developed and implemented interim management plan to limit expenses and improve hotels’ brand image
• After 3 months, parties successfully structured new financing terms and entered into a deferment agreement

Supervisor for Special Servicer
150-Room National Brand Hotel

• Retained by Special Servicer to manage cash flow during settlement discussions
• Designed and implemented cash management program to capture merchant services deposits and bank accounts
• After 6 months, Special Servicer and debtor entered into a settlement agreement

Hotel Receivership
Non-Performing National Brand

• Worked with national brand to preserve and transfer franchise
• agreement
• Kept property open by managing it to positive net cash flow, preserving its value for a sale
• Identified qualified agent from outside the market
• Successfully transferred the property via a court-approved process

To learn more, please contact David Kieffer.