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Hardage Hotels I wants final cash OK

by Jamie Mason | Published March 13, 2012 at 3:58 PM

Hotel owner Hardage Hotels I LLC has interim access to its cash collateral to fund its operations until it can either reorganize or sell its assets in Chapter 11.

Judge H. Christopher Mott of the U.S. Bankruptcy Court for the Western District of Texas in El Paso will consider the final cash collateral use on April 2.

The interim cash collateral use was approved on March 8, courtroom minutes said.

Hardage Hotels I owns and operates seven hotels in El Paso; Overland Park, Kan.; Newark, Calif.; Kansas City, Mo.; Des Moines, Iowa; Lincoln, Neb.; and Dublin, Ohio, under the Chase Suites brand name.

The company wants access to its cash collateral to fund its continued operations in Chapter 11 until it can either reorganize or sell its assets.

The San Diego-based debtor filed for Chapter 11 on March 6.

The debtor, which is owned by Hardage Hotels LLC, filed for bankruptcy protection after secured lender OneWest Bank FSB reneged on its agreement to restructure Hardage Hotels I's debt outside of a court proceeding.

"While the economy has struggled and that has nonetheless affected Hardage's hotel business, most of the hotels are cash positive and not in financial distress," court filings said.

The debtor owes $34.2 million in secured prepetition debt. The debtor owes OneWest Bank more than $5.3 million on one loan, $11.525 million on another loan and $5.742 million on a third loan. The debtor owes $2.45 million to California First National Bank NA and has various loans with Security Bank of Kansas City.

In September 2010, OneWest Bank filed a collection action against the debtor and sought to appoint a receiver to oversee its El Paso hotel. However, after the court determined that the bank hadn't provided the debtor with adequate notice, it vacated the receivership.

OneWest Bank has also sought to appoint a receiver to oversee Hardage Hotel I's Lincoln hotel. A hearing on the request is scheduled for March 16. In November, the bank had sought to foreclose on the debtor's Dublin hotel.

In 2011, the debtor and OneWest worked to negotiate its debt, and a final agreement was reached on Dec. 2.

Hardage Hotels I filed a lawsuit against OneWest Bank on March 5 in California state court in Los Angeles for fraud, breach of contract, breach of the covenant of good faith and fair dealing and promissory estoppel. The bank agreed not to take any action on the hotels before Feb. 1, but didn't stick to the agreement.

The bank filed a notice of foreclosure on the El Paso property on Jan. 13.

Hardage Hotels I tried to find replacement or additional financing, as well as alternative sources of capital or equity, but it was unable to do so.

Another unit of Hardage Group, a San Diego hotel management, franchise and development company with operations in 10 states called Hardage Hotels II LP, filed for Chapter 11 on Feb. 22 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington.

Hardage Hotels II owns the 219-room Chase Suite Hotel Rockville in Rockville, Md.

Hardage Hotels II blamed its financial problems on the economic recession and increased competition in the hospitality industry.

The case was dismissed on July 13 after Judge Brendan Linehan Shannon in Wilmington gave Hardage Hotels II's secured lender, CW Capital Asset Management LLC, relief from stay to foreclose on its hotel.

Hardage Hotels I listed its assets at $10 million to $50 million and its liabilities at $50 million to $100 million.

Its largest unsecured creditors include Property Tax Resources of Carlsbad, Calif. ($49,587), Levitz, Zacks & Ciceric Inc. of San Diego ($37,803), United Royal Drywall of El Paso ($33,570), American Hotel Register of Chicago ($32,188) and American Tex Chem Corp. of San Bernardino, Calif. ($24,426).

Debtor counsel Trey Monsour of Haynes and Boone LLP didn't return calls for comment.

Transitional Finance Partners LLC is its financial adviser.

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