Hotel Won’t Seek Bankruptcy Shield : Owner Pledges to Keep U.S. Grant Open
Despite predictions by city officials that the U.S. Grant Hotel is headed for bankruptcy, the owner said Tuesday that the hotel will remain open and that it will not “implement Chapter 11” under the U.S. Bankruptcy Code in the immediate future.
Sybedon Corp.’s vow to keep the 283-room hotel open came one day after the City Council denied its bid to have a $6-million government loan subordinated to $1 million in new financing from Home Federal Savings. The subordination of the city loan was one of several conditions set by Home Federal for extending the new loan.
City Atty. John Witt and several council members say they fear that subordinating the city’s loan would only reduce the city’s chance of recouping its money if the hotel is forced into a foreclosure sale.
“While the decision . . . was disappointing, it only means that U.S. Grant management will need to continue to seek alternative financing arrangements,” Sybedon said in a prepared statement issued Tuesday. “The hotel is definitely planning to remain open.”
Operator Bailed Out
The 77-year-old hotel has been financially ailing since reopening in December, 1985, after a four-year, $64-million refurbishment. During its first year of operation, it lost $9 million, prompting operator Atlas Hotels of San Diego to bail out of the property.
Sybedon, a New York-based real estate investment firm that bought the hotel for $79 million, has been looking unsuccessfully for a new operator ever since.
The Grant has not made payments on its $32-million mortgage from Home Federal since February, causing the lender to file a notice of default last month. Home Federal could auction the property off in a foreclosure sale as early as January.
The Grant also owes back property taxes and hasn’t paid several of its suppliers. The problems have prompted the hotel’s owners to lay off one-third of the hotel’s staff and to cut room service to many rooms. A hotel representative said Tuesday, however, that room service will be restored to the entire hotel by the end of this week.
Home Federal spokeswoman Monica Wiley said Tuesday that her company’s $1-million loan offer was actually withdrawn by the time the City Council session convened Monday night because Sybedon has failed to meet other loan conditions.
Home Federal is proceeding with its foreclosure of the property, although, Wiley said, the lender is continuing to work with Sybedon to find an “alternative solution” to the Grant’s financing problems.
