Williamsburg Hotel combined plan, statement hearing set for March 22

By Sarah Lizee

Olympia, Wash., Feb. 24 – The confirmation schedule for the Chapter 11 plan of 96 Wythe Acquisition LLC, the owner of the Williamsburg Hotel in Brooklyn, N.Y., has been set, according to an order filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

The combined hearing on confirmation of the plan and disclosure statement is scheduled for March 22.

Solicitation was set to begin on Friday. The voting record date is Feb. 1.

The deadline to vote on the plan is 5 p.m. ET on March 13.

As previously reported, the plan was filed by a Chapter 11 trustee. The trustee made amendments to the plan on Feb. 14.

After an extensive marketing and auction process, the court approved the sale of the hotel to Quadrum Development Corp. for $96 million. The sale is expected to close on or before March 31.

All of the proceeds of the sale are subject to the liens of senior secured mortgage lender Benefit Street Partners, which the court approved in the amount of at least $108.69 million.

Absent an agreement with Benefit Street Partners, there would be no proceeds available to pay other claims or confirm a plan.

Following extensive negotiations between the trustee and lender, Benefit Street has agreed to carve-out from its liens and claims an amount of the sale proceeds to provide for enough funding to confirm a plan.

The plan provides that the trustee will distribute a portion of the sale proceeds to Benefit Street on account of its senior secured claims and pay (or reserve for) some administrative expenses and priority claims, and use the remainder of the sale proceeds, consisting of $150,000, to fund a reserve that will be used to pursue recoveries on account of claims and causes of action not released under the plan.

To accomplish this, the plan has several agreements regarding the deferral of certain administrative and other claims that would otherwise be needed to pay in cash (or reserve) on the effective date.

The trustee and his professionals have agreed to receive payment of a portion of their allowed fees and expenses in the amount of $4.66 million from the sale, and defer $1.9 million of their fees and expenses to recovery from post-effective date available cash.

The New York City Department of Finance has agreed that its allowed priority tax claims on account of unpaid hotel occupancy taxes will be paid 15% in cash on the effective date of the plan (which equates to $312,050) with the $1.77 million balance to be paid from post-effective date available cash.

During the Chapter 11 case, Benefit Street previously agreed to subordinate a substantial portion of its allowed claims in the amount of at least $12.7 million to general unsecured claims. In light of the insufficiency of sale proceeds to pay its senior secured claim in full as required, Benefit Street has further agreed to reduce the amount of its senior secured claim payable on the effective date to $88.7 million and defer a $5.5 million portion of the recovery otherwise available to it on account of its senior secured claim to be paid from post-effective date available cash.

The trustee and Benefit Street have reached an agreement in principle with some of the professionals retained by the debtor prior to the appointment of the trustee to reduce their requests for fees and expenses from more than about $7.9 million by 25%, which reduced fees and expenses will be paid pro rata from a reserved fund of $964,463.25, with the balance to be paid from post-effective date available cash.

After payment of the above amounts, any additional post-effective date available cash will be paid first to holders of allowed general unsecured claims pro rata until the claims are paid in full; second to Benefit Street on account of its subordinated secured claim; third to holders of allowed subordinated claims held by insiders of the debtor; and finally to holders of the debtor’s equity interests.

The Brooklyn, N.Y.-based hotel owner filed bankruptcy on Feb. 23, 2021 under Chapter 11 case number 21-22108.

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