Hotel owner: Dismiss bankruptcy

Hot Springs spa’s debt too tricky to reorganize, filing says

HOT SPRINGS -- The Hotel Hot Springs & Spa's ownership has asked to dismiss the bankruptcy petition it filed earlier this month, telling the court that restructuring debt owned by the hotel's mortgage holder is unlikely.

According to the motion GRGCBHS LLC, the corporate entity that owns the hotel and is managed by Gary R. Gibbs, filed last week in federal bankruptcy court, debt secured by the hotel and adjacent parking garage is too onerous to reorganize.

Summit Investment Management, the Denver private equity firm that purchased the hotel's mortgage last year, said in an earlier court filing that the hotel, the hotel's personal property and parking garage are securing $35 million owed by GRGCBHS LLC and other entities with an ownership stake in the hotel.

Bankruptcy Judge Ben Barry ruled earlier this month that the foreclosure complaint Summit Investment filed last month in Garland County circuit court can proceed in concurrence with the bankruptcy petition, and that the hotel will remain in the possession of KPartners Hotel Management of San Antonio. Division 3 Circuit Judge Lynn Williams appointed KPartners to run the hotel pending the final disposition of the foreclosure action.

Summit Investment is seeking a $23,374,719 judgment against the 305 Malvern Ave. property. The bankruptcy petition listed liabilities of $1 million to $10 million against assets of $50,000 or fewer.

"[Summit Investment] has a blanket lien on the assets of the debtor and no equity likely exists," the ownership's motion to dismiss said. "Moreover, a receiver is currently operating the debtor's main asset and can likely resolve most issues outside of a bankruptcy proceeding."

A hearing on the motion has been scheduled for Dec. 13. According to the motion, Summit Investment doesn't object to the petition being dismissed.

Barry's order allowing Summit Investment and other secured creditors to continue foreclosure proceedings doesn't apply to the 20 unsecured creditors listed in the bankruptcy petition. None of them have asked the court to lift protections that attach to a debtor who's filed for bankruptcy.

The petition lists $1.6 million in unsecured debts, including $105,313 in unpaid real estate taxes owed to the county tax collector, $36,160 in unpaid hospitality taxes owed to the Hot Springs Advertising and Promotion Commission and $23,425 owed to the city of Hot Springs in unpaid rent on the vacant lot adjacent to the hotel.

The hotel's liquidity problems stem from Gibbs appropriating more than $1.6 million of 2017 operating revenue for his personal use, according to court records, putting operating accounts at a deficit despite the hotel grossing more than $7.6 million last year.

Summit Investment's court filings detail a pattern of mismanagement, including a history of payroll for the hotel's 75 employees not being funded, unpaid vendors, deferred maintenance, liquor license suspensions and guest rooms having limited or no television service.

Visit Hot Springs CEO Steve Arrison said Tuesday that operations have improved significantly under KPartners' leadership. He said the company's corporate sales staff has been assisting the hotel's sales team in booking rooms and rehabilitating the hotel's reputation, which, according to court filings, had deteriorated under Gibbs' ownership.

Being adjacent to the Hot Springs Convention Center, the hotel is key to the convention business that contributes to sales tax revenue for local governments and the ad commission, Arrison said, noting that 1,500 people will be attending the Arkansas Farm Bureau Federation State Convention next week at the convention center.

"[KPartners] is doing a great job," he said. "We're very pleased with the progress they've made in operations at the hotel. We're excited to have them on board and look forward to a successful partnership in 2019. The hotel is moving in a positive direction."

Gibbs faces a pending motion for contempt in Garland County Circuit Court that alleges he violated a court order by withdrawing more than $30,000 from a hotel bank account after KPartners had taken possession of the property.

NW News on 11/23/2018

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