Mexico’s Grupo Posadas files for pre-packaged Chapter 11 bankruptcy

By Sarah Lizee

Olympia, Wash., Oct. 26 – Grupo Posadas SAB de CV announced Tuesday that it made a pre-packaged Chapter 11 bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of New York and has advanced its previously announced debt restructuring by obtaining additional support from holders of its 7 7/8% senior notes due 2022.

The company said this consensual financial solution will reduce its debt service obligations and extend the schedule on which its debt matures by five and a half years to Dec. 30, 2027, allowing Grupo Posadas to prioritize the use of cash for operating activities to preserve jobs and help maintain its hotels, according to a press release.

Given that the company has already obtained the necessary support from noteholders, with 100% of those voting having voted to approve the company's plan of reorganization, it is expected that the process will be completed within about 60 days, the company said.

“Today marks the culminating step toward achieving a sustainable capital structure for Grupo Posadas,” Jose Carlos Azcarraga, chief executive officer of Grupo Posadas, said in the release.

“This comprehensive debt restructuring, which we announced two months ago as part of our ongoing efforts to maximize our financial flexibility and best manage the Covid-19-related challenges affecting the entire hospitality industry globally, will enable us to emerge from the pandemic as a financially stronger enterprise.”

The company said that all day-to-day operations, throughout the company's properties, continue as normal without interruption, using cash from ongoing operations.

Grupo Posadas said there will be no impact on its relationships with its employees, guests, agencies, loyalty and vacation club members, suppliers, business partners, or shareholders, and the company will continue to meet its obligations to these stakeholders.

The company has filed a number of customary first-day motions with the court to support business operations during the Chapter 11 process. This includes continuation of employee wages and benefits as well as loyalty and vacation club program benefits in the ordinary course. Approval is expected in short order, the company said.

Plan terms

Subject to court approval, the plan provides for the exchange of the existing notes for new senior notes secured by liens on real estate and certain accounts receivable of the company.

All other undisputed claims, including those of suppliers for goods and services provided before as well as during the Chapter 11 process, are unimpaired and will be paid in full in the ordinary course or otherwise satisfied.

Specifically, holders of administrative claims will be paid in full in cash, according to the disclosure statement.

Holders of priority tax claims and other priority claims will be paid in full.

Holders of secured claims will receive payment in full in cash, reinstatement of the claims, or the collateral securing their claims.

Existing notes claimholders will receive, for each $1,000 principal amount and the discharge in full of all accrued interest prior to the petition date in respect of their existing notes claims, new notes in a total amount equal to $1,000 plus an amount equal to the sum of (a) 4% of a $1,000 principal amount, multiplied by (b) a fraction equal to the number of days that have elapsed from Aug. 1 through the plan effective date, divided by 360 days. If the plan effective date occurs on or after Jan. 1, then the amount calculated above for the period from Aug. 1 through Dec. 31 will be paid in the form of additional initial principal amount and the amount calculated for the period from Jan. 1 through the plan effective date will be paid in cash.

Holders of general unsecured claims will receive payment in full in cash or reinstatement.

Intercompany claims and interests will be reinstated.

Other terms

The company is represented by Cleary Gottlieb Steen & Hamilton LLP as international legal counsel, Ritch, Mueller y Nicolau, SC and Creel, Garcia-Cuellar, Aiza y Enriquez, SC as Mexican legal counsel, and DD3 Capital Partners as financial adviser.

In its petition, the company listed $500 million to $1 billion in both assets and liabilities.

Its largest unsecured creditors are Danny Lee, vice president of Citibank, NA, based in New York, with a $392.61 million unsecured debt claim, Servicio de Administracion Tributaria, based in Mexico City, with a $17.72 million unsecured debt tax credits March 2022 installment claim and a $17.72 million unsecured debt tax credits March 2023 installment, Sigma Foodservice Comercial S de RL de CV, based in Nuevo Leon, Mexico, with a $1.19 million unsecured claim, and Promotora Torcaz SA de CV, with a $1.02 million unsecured claim.

The Mexico City-based hotel company filed Chapter 11 bankruptcy under case number 21-11831.

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