Home Fed, Grant’s Owner OK Deadline for Reorganization
The bankrupt owner of the U. S. Grant Hotel and its largest creditor, Home Federal Savings, agreed Thursday to a “drop dead” date by which a Grant reorganization plan must be confirmed by a U. S. Bankruptcy Court or Home Federal will be allowed to proceed with foreclosure.
The Feb. 28, 1989, deadline, agreed to by U. S. Grant Hotel Associates and Home Fed in a stipulation filed Thursday at U. S. Bankruptcy Court in San Diego, reduces the chances that the 78-year-old hotel will be sold at a foreclosure auction soon.
The Grant, which owes Home Fed $7 million in back interest and principal, received a reprieve from foreclosure automatically in February when it filed for protection under Chapter 11 of the U. S. Bankruptcy Code two days before Home Fed was to have foreclosed on its $32-million mortgage.
Since then, the Grant and Home Fed have been negotiating a mutually acceptable debt reorganization plan. Although the two parties have yet to come to an agreement, Home Fed has lent the hotel an additional $670,000 to keep it afloat.
In a draft reorganization plan filed last month, the Grant proposed that Home Fed become a one-third owner of the hotel and take management control of the 283-room downtown landmark. In exchange, Home Fed would relax the terms of its loan and call off the foreclosure. While Home Fed has described the draft as “workable,” it has not signed off on the plan.
If the two parties had not agreed to the stipulation, which must be approved by Bankruptcy Judge Louise Malugen at a Sept. 15 hearing, Home Fed was prepared to move that a trial be held next month to lift the stay, allowing it proceed with foreclosure. Now, the stay will be lifted automatically next February if a reorganization plan is not adopted.
Grant attorney Ross Pyle said the stipulation agreement “clears the decks” for a reorganization plan to be presented to Malugen by October or November. “We are pleased with it because now we can concentrate on the plan and not the fight (over the automatic stay),” Pyle said.
Home Federal attorney Victor Vilaplana said the stipulation was a “generous” move by Home Fed to give the hotel breathing room. “It’s in everyone’s interest to see if a plan can be put together,” Vilaplana said.
Home Fed Liability an Issue
In the stipulation, Home Fed served notice that its acceptance of a Grant debt reorganization plan would be contingent on the S&L; being dropped from all liability claims filed by hotel investors. One such lawsuit filed by 22 hotel investors accuses Home Fed, Grant managing partner Sybedon Corp. of New York, and Prudential-Bache Securities and others of misrepresentation and securities law violations.
Vilaplana said Home Fed deserves to be immune from such claims because it is doing investors a favor by not foreclosing on the hotel. The foreclosure would cause a change in ownership, he said, which in turn would force all hotel investors to repay tax benefits they received from their investments.
Attorney Michael Aguirre who represents the 22 hotel investors in the suit was not available for comment Thursday.
