Hotel, Real Estate Filings Continue to Outpace Historical Averages; July’s Bankruptcies Heavily Concentrated in the $10M - $50M Liability Range

Chapter 11s in the $10 million to $50 million range of liabilities, which made up 52% of cases in the first half of the year, account for almost 80%of July’s chapter 11s. This week included the year’s 19th hotel chapter 11 - Mary Brickell Village Hotel, which owns the Aloft Miami Brickell Hotel - as well as traffic control steel pole manufacturer Pelco Structural, real estate developer Heron Development and one single asset real estate debtor, Nassau Brewing Company Landlord. For access to the relevant documents above as well as our First Day by Reorg team's coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities including hotel and real estate chapter 11 filings click here to request a trial. 

Real estate filings continue to outperform, even when compared on a gross filer basis to prior years (which otherwise have seen significantly more filings across all sectors than 2021):

Mary Brickell Village Hotel filed on Wednesday in the Southern District of Florida to restructure to allow its Aloft Miami Brickell hotel to “resume its pre-pandemic level of operations poised for success.” The Miami-based hotel owner filed after an “involuntary acceleration” of its mortgage loan. The hotel, according to the debtor, has a fair market value of $32 million, encumbered by its mortgage with $17 million in principal owed. Tracing its financial issues to the Covid-19 pandemic and its effect on the hospitality industry, the debtor seeks to “preserve the going-concern value of their business and dozens of full-time jobs, implement a reorganization, through which the Debtor intends to exercise its rights to cure any alleged defaults related to the mortgage, subject to its legal and equitable arguments for reductions in respect thereof, and continue operating in the ordinary course.”

Hotel filings have dramatically increased this year:

Pelco Structural, which manufactures steel poles used for traffic control, utility, lighting and communications, filed after failing to generate positive cash flow due to various litigations and related collection attempts on a $2.7 million judgment. The case would be funded by the use of cash collateral of Pelco Industries, Inc. (the debtor’s sole member), which was assigned its secured debt of $8 million from Pelco Products, Inc., a prior affiliate of the debtor.

Facing more than 50 lawsuits commenced by individuals asserting sexual abuse claims, The Norwich Roman Catholic Diocesan Corporation filed to implement an orderly claims administration process and continue the mission of the diocese. Norwich, a diocese encompassing Middlesex, New London, Windham and Tolland counties in Connecticut, as well as Fisher Island, N.Y., is the latest of a series of Roman Catholic dioceses that have filed for chapter 11 in recent years - including six in 2020 - to address sexual abuse claims, with many of these filings following the dioceses’ respective states’ amendments to the relevant statute of limitations for sexual abuse claims.

Below is a recap of filing alerts and case summaries from this review period, all of which can also be found on the First Day website:

Case data, such as advisors and DIP financing terms, including for filings discussed above, can be found in the First Day Database, which includes all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.