John Q. Hammons denied court OK of disclosure statement for plan

By Caroline Salls

Pittsburgh, Jan. 30 – John Q. Hammons Hotels and Resorts was denied approval of the disclosure statement for its plan of reorganization, according to an order filed with the U.S. Bankruptcy Court for the District of Kansas.

In the order entered on Monday, judge Robert D. Berger said “this is not a traditional real-estate bankruptcy; rather, it is largely a battle between debtors and JD Holdings for control over debtors’ hotels.”

Berger said some parties have already attempted mediation, but achieved no resolution.

“Perhaps management is recalcitrant and unyielding to the logic that demands a difficult, but nevertheless successful, agreement,” Berger said.

As a result, the judge said he will order the John Q. Hammons debtors, JD Holdings and creditor SFI Belmont, LLC to return to mediation, “with the caution that debtors owe a fiduciary duty to the entire creditor body and that after more than 18 months of bankruptcy proceedings, new management may be demanded at some point.”

Berger said he denied approval of the disclosure statement because he disagreed with the company’s contention that all claims are unimpaired under the plan, because the disclosure statement does not contain adequate information and because the plan is “patently unconfirmable.”

The judge said the plan is not feasible, in part because it hinges on the outcome of pending litigation.

Berger said he would also issue a separate order terminating John Q. Hammons’ exclusive periods for filing and soliciting votes on a plan.

As previously reported, John Q. Hammons said it would pay in full all allowed claims under the plan and distribute the net remaining value of its estates to the holders of equity securities.

To generate the funds to make these payments, the company said it intended to sell assets or refinance debt.

However, John Q. Hammons said it is unable to do so because lenders who would otherwise either refinance the debt or finance purchasers of the assets will not provide these loans while JD Holdings, LLC continues its appeals of case dismissal, automatic stay relief and right-of-first-refusal agreement rejection orders.

Before it became apparent that lenders will not proceed until the appeals conclude, John Q. Hammons said it received bids to purchase its 35-hotel portfolio for a price sufficient to satisfy all allowed claims.

In addition, the company said it has enough cash and additional assets beyond the hotel portfolio, which are worth hundreds of millions of dollars. As a result, John Q. Hammons said it can pay all debts and distribute the net proceeds to their owners upon completion of the appeals and sale or refinancing of its assets.

During a 270-day period after entry of a plan confirmation order and the plan effective date, the company said it would continue to operate its businesses, pay all priority and tax claims in full, continue to pay all secured debt according to the terms of the adequate protection orders and pending cash collateral orders and pay interest on all allowed unsecured claims.

John Q. Hammons is a Springfield, Mo.-based hotel operator. It filed for bankruptcy on June 26, 2016. The Chapter 11 case number is 16-21142.

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