Court approves disclosure statements for two M Waikiki competing plans

By Caroline Salls

Pittsburgh, April 17 - The disclosure statements for two competing plans of reorganization filed for M Waikiki LLC's bankruptcy case were approved Monday by the U.S. Bankruptcy Court for the District of Hawaii.

The joint plan confirmation hearing is scheduled to begin on June 1.

As previously reported, one plan was filed by M Waikiki and the Davidson Family Trust and the other by Marriott International, Inc.

M Waikiki plan treatment

Under the M Waikiki and Davidson Family Trust 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.

• If Marriott votes to accept the debtor's plan, Marriott's unsecured claim will be paid in full.

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%.

• 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 canceled. Holders will receive a new class A, class B or class C note only if all allowed claims are paid in full.

Marriott plan

Meanwhile, under its proposed plan, Marriott would buy the estate's assets.

Specifically, Marriott intends to transfer an amount sufficient to fund the plan and the release of the Marriott secured and unsecured claims.

In exchange for the funding, the estate would transfer all its assets to Marriott, including claims brought by the estate before the bankruptcy court or otherwise.

The Marriott plan provides for payment in full in cash of allowed claims for all classes, except equity interests, according to the plan's associated disclosure statement.

Equity interests will be extinguished and receive no distribution under the plan.

Cash consideration for the Davidson Trust debt will be set aside pending resolution of the Davidson loan dispute.

If Marriott is not the successful purchaser, Marriott will not waive or release its secured or unsecured claims.

If Marriott is the successful bidder, the reorganized debtor will manage the hotel exclusively and retain title, ownership, possession and control.

M Waikiki, a San Diego-based hotel investment company, filed for bankruptcy on Aug. 31, 2011. The Chapter 11 case number is 11-02371.

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