M Waikiki, Davidson Trust tweak reorganization plan ahead of hearing

By Jim Witters

Wilmington, Del., March 9 - M Waikiki LLC and the Davidson Family Trust changed the treatment of creditors Wells Fargo and Marriott in an amended Chapter 11 plan of reorganization and associated disclosure statement filed Thursday with the U.S. Bankruptcy Court for the District of Hawaii.

A hearing on the disclosure statement is scheduled for March 12.

Changes to plan

Under the amended plan

• Wells Fargo will receive a cash payment of $20 million and a five-year note on its secured claim of $114.9 million. Interest on the note will be either 4.5% through the second anniversary of the plan effective date and 5.5% thereafter or Libor plus 300 basis points for the duration of the note, with a 5.1% floor.

Previously, the plan called for a $2 million cash payment and interest on the five-year note of Libor plus 225 bps.

• If Marriott votes to accept the debtor's plan, Marriott's unsecured claim will be paid in full, with annual interest of 3.2%.

If Marriott votes to reject the plan or does not withdraw its competing plan, and the claim is deemed to be subordinate to senior claims, the debtor will pay up to $6 million plus 10% of the balance due.

If Marriott's claim is deemed non-subordinate to senior claims, the debtor will pay 100% of the allowed claim up to the amount in the Marriott reserve, plus $800,000 a year until the balance is paid. Interest will be 3.2%.

Marriott asserts its claim is at least $72 million. The debtor believes the claim should be disallowed.

Treatment of other creditors

The amended plan leaves unchanged the treatment of other creditors.

• Holders of non-tax priority claims and general unsecured claims will be paid in full in cash;

• Holders of secured tax claims for years before 2012 will either be paid in full in cash or receive the collateral securing the claim;

• Holders of secured claims for taxes in years 2012 and after will retain their rights to payment;

• The holder of the R.D. Olson secured claim will receive a $1.43 million cash payment. There will be no interest unless the plan does not take effect by June 1, in which case interest would accrue at 5% from June 1, 2011 until the claim is paid;

• The Marriott secured claim, which is disputed and subject to causes of action, will be paid in full in cash;

• The Davidson Trust will receive 77% of the new senior equity in the reorganized company on account of its secured claim;

• Holders of miscellaneous secured claims will either be paid in full in cash or receive the collateral securing the claim;

• The Aqua/Modern claim will be paid in full under several payment scenarios;

• The Davidson Trust will receive 5% of the new senior equity in the reorganized company in exchange for its unsecured claim; and

• The company's class A, class B and class C interest will be cancelled. Holders will receive a new class A, class B or class C note only if all allowed claims are paid in full.

M Waikiki, a San Diego-based hotel investment company, filed for bankruptcy on Aug. 31. Its Chapter 11 case number is 11-02371.

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