CHICAGO - With investors weighing a forbearance proposal that seeks to avoid foreclosure proceedings, the trustee on $98 million of senior-lien revenue bonds issued for a struggling St. Louis hotel and convention center complex has scheduled a conference call for bondholders on Wednesday.
The call is scheduled for 1 p.m. Central Time on Dec. 10, according to a notice posted on the Web site set up for bondholders by trustee UMB Bank at http://conventionhotelbondholders.com/.
The conference call - being held a week before a $3.5 million debt service payment is due - follows a meeting held last month between bondholders, the hotel operators, and representatives of the developer and obligated group.
Bondholders were presented with the forbearance proposal at the meeting in St. Louis. The meeting was requested by the project developer, Historic Restoration Inc., and hotel operator Marriott Corp. after their disclosure of an expected $1.4 million shortfall in hotel revenues available for a December debt service payment. The trustee could move to foreclose on the property following a debt service default.
"This forbearance is requested in recognition of the fact that pursuing post-default remedies at this time is not in the best interest of the operations of the project, the Series A bondholders, or the obligated group given current hotel market conditions and the general lack of liquidity in the commercial real estate market," the forbearance term sheet reads.
The forbearance would expire Dec. 31, 2009. The trustee set up the new conference call ahead of the payment due date to "conduct further discussions and share additional information" on the issues raised at the meeting, according to the notice alerting bondholders to the new conference call.
The hotel operators have said they expect the local lodging market to continue its downward trend for at least two years. Officials said they have polled potential investors about a restructuring, but have not received much interest.
Historic Restoration Inc. earlier agreed to cover a $2.2 million shortfall in the last payment due in June as part of a deal struck for it to purchase the majority ownership in the project owned by Kimberly-Clark Corp. The outright transfer of ownership, however, was blocked by Marriott. HRI still took over $18 million in subordinate notes, taking control of the ownership group.
HRI currently acts as a managing member of the group - known as Gateway Hotel Partners LLC and Gateway Tower Partners LLC - but it was Kimberly-Clark, through its subsidiary Housing Horizons LLC, that originally held a majority stake of 85%. Housing Horizons had previously covered the debt service shortfalls.
The St. Louis Industrial Development Authority issued the senior-lien revenue bonds in 2000 as part of a complex financing scheme to acquire and renovate the $266 million hotel complex at the city's convention center. The 165-room Renaissance Suites opened in 2002 and the 918-room Renaissance Grand opened a year later.
The bonds initially garnered a low investment-grade rating but have since fallen deep into junk-bond territory, as hotel revenues have failed to meet projections after a convention slump following the 2001 terrorist attacks.