Wardman Hotel Owner, LLC
FILING ALERT: Wardman Hotel Owner Files Chapter 11 in Delaware
Mon 01/11/2021 15:16 PM
Relevant Document:
Voluntary Petition
First Day Declaration
Wardman Hotel Owner, LLC, which owns real property in Washington that formerly operated as the Washington Marriott Wardman Park Hotel, filed for chapter 11 protection today in the Bankruptcy Court for the District of Delaware. The company reports $100 million to $500 million in both assets and liabilities. The debtor is represented by Pachulski Stang Ziehl & Jones in Wilmington, Del. The case number is 21-10023. Continue reading for our First Day team's analysis of the Wardman Hotel Owner chapter 11 filing and Request a Trial for access to the linked documents and analysis as well as our coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
According to the declaration of the debtor’s independent manager, James Decker, the debtor “intends to conduct an orderly sale of substantially all of its assets, distribute the proceeds of such sale to creditors, and wind down its remaining business.” The company has negotiated an $8 million DIP financing facility with prepetition lender Pacific Life Insurance Company, with $3 million in funding sought on an interim basis.
Wardman’s prepetition capital structure includes $130.5 million in term loan obligations owed to Pacific Life Insurance Company, which indirectly owns 100% of the debtor’s equity. As of Nov. 30, the debtor estimates outstanding obligations to the hotel’s vendors and other unsecured creditors at approximately $1.3 million, “the vast majority of which are paid by, and the responsibility of, Marriott.”
The debtor says that its financial struggles predate the pandemic, with net income dropping by 80% ($24.8 million to $5 million) between 2010 and 2018, and that Marriott “repeatedly failed to live up to its required standards of performance and to fulfill its contractual obligations as set forth in the [hotel management agreement], causing this inconsistent and material decline in the Hotel’s performance.” Despite the hotel’s prominent location and its sizeable convention center and meeting space within the nation’s capital, the debtor says, “the Hotel failed to meet operational and performance goals and, thus, failed to meet financial goals and anticipated profitability.” The company’s financial condition was then exacerbated by the pandemic, “which resulted in a sharp decline in tourism, the elimination of essentially all business travel, and the cancelation of all conventions.”
After the debtor refused to fund a $10 million working capital request from Marriott in March 2020 that the debtor says was “without any legitimate basis or justification,” the two parties issued notices of default to each other under their hotel management agreement. On Sept. 8, Marriott sued the debtor and Pacific Life (as lender) in the Circuit Court for Montgomery County, Maryland, for breach of contract and tortious interference. On Dec. 8, the court entered an order preliminarily and mandatorily compelling the debtor to pay money to Marriott upon Marriott’s issuance of unilateral future capital notices. The debtor has appealed the injunction and has filed “significant counterclaims.”
“The Debtor has only limited amounts of operating cash, and no viable means to satisfy Marriott's capital call (let alone more future calls), and, consequently, no lawful or practically effective means to abide by the Mandatory Injunction,” Decker says. While the debtor says it believes there is approximately $4.7 million remaining in the hotel’s furniture, fixtures and equipment reserve, and the debtor had agreed to previously use certain of these funds to temporarily satisfy the Marriott capital calls, “those funds are the Debtor’s property and were designated for the specific purpose of upgrading the furnishings of the hotel.”
The debtor lists only four unsecured creditors, as follows:
The debtor’s equity is held as follows:
According to the petition, Pacific Life Mutual Holding Company owns 100% of Pacific Life Corp., which in turn owns 100% of Pacific Life Insurance Company, which in turn owns 100% of Pacific Asset Holding LLC, which in turn owns 100% of PL Wardman Member, LLC, “which now owns 100% of Wardman Hotel Owner, L.L.C.”
Reorg First Day is monitoring this case and will provide further coverage as appropriate.
Voluntary Petition
First Day Declaration
Wardman Hotel Owner, LLC, which owns real property in Washington that formerly operated as the Washington Marriott Wardman Park Hotel, filed for chapter 11 protection today in the Bankruptcy Court for the District of Delaware. The company reports $100 million to $500 million in both assets and liabilities. The debtor is represented by Pachulski Stang Ziehl & Jones in Wilmington, Del. The case number is 21-10023. Continue reading for our First Day team's analysis of the Wardman Hotel Owner chapter 11 filing and Request a Trial for access to the linked documents and analysis as well as our coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
According to the declaration of the debtor’s independent manager, James Decker, the debtor “intends to conduct an orderly sale of substantially all of its assets, distribute the proceeds of such sale to creditors, and wind down its remaining business.” The company has negotiated an $8 million DIP financing facility with prepetition lender Pacific Life Insurance Company, with $3 million in funding sought on an interim basis.
Wardman’s prepetition capital structure includes $130.5 million in term loan obligations owed to Pacific Life Insurance Company, which indirectly owns 100% of the debtor’s equity. As of Nov. 30, the debtor estimates outstanding obligations to the hotel’s vendors and other unsecured creditors at approximately $1.3 million, “the vast majority of which are paid by, and the responsibility of, Marriott.”
The debtor says that its financial struggles predate the pandemic, with net income dropping by 80% ($24.8 million to $5 million) between 2010 and 2018, and that Marriott “repeatedly failed to live up to its required standards of performance and to fulfill its contractual obligations as set forth in the [hotel management agreement], causing this inconsistent and material decline in the Hotel’s performance.” Despite the hotel’s prominent location and its sizeable convention center and meeting space within the nation’s capital, the debtor says, “the Hotel failed to meet operational and performance goals and, thus, failed to meet financial goals and anticipated profitability.” The company’s financial condition was then exacerbated by the pandemic, “which resulted in a sharp decline in tourism, the elimination of essentially all business travel, and the cancelation of all conventions.”
After the debtor refused to fund a $10 million working capital request from Marriott in March 2020 that the debtor says was “without any legitimate basis or justification,” the two parties issued notices of default to each other under their hotel management agreement. On Sept. 8, Marriott sued the debtor and Pacific Life (as lender) in the Circuit Court for Montgomery County, Maryland, for breach of contract and tortious interference. On Dec. 8, the court entered an order preliminarily and mandatorily compelling the debtor to pay money to Marriott upon Marriott’s issuance of unilateral future capital notices. The debtor has appealed the injunction and has filed “significant counterclaims.”
“The Debtor has only limited amounts of operating cash, and no viable means to satisfy Marriott's capital call (let alone more future calls), and, consequently, no lawful or practically effective means to abide by the Mandatory Injunction,” Decker says. While the debtor says it believes there is approximately $4.7 million remaining in the hotel’s furniture, fixtures and equipment reserve, and the debtor had agreed to previously use certain of these funds to temporarily satisfy the Marriott capital calls, “those funds are the Debtor’s property and were designated for the specific purpose of upgrading the furnishings of the hotel.”
The debtor lists only four unsecured creditors, as follows:
The debtor’s equity is held as follows:
According to the petition, Pacific Life Mutual Holding Company owns 100% of Pacific Life Corp., which in turn owns 100% of Pacific Life Insurance Company, which in turn owns 100% of Pacific Asset Holding LLC, which in turn owns 100% of PL Wardman Member, LLC, “which now owns 100% of Wardman Hotel Owner, L.L.C.”
Reorg First Day is monitoring this case and will provide further coverage as appropriate.
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