Lehman subsidiary files bankruptcy to sell condominium hotel property

By Caroline Salls

Pittsburgh, June 2 - Lehman Brothers Holdings Inc. wholly owned subsidiary FL 6801 Spirits LLC and three of its wholly owned subsidiaries filed Chapter 11 bankruptcy on June 1 in the U.S. Bankruptcy Court for the Southern District of New York, seeking bankruptcy protection for its condominium hotel property in Miami Beach, Fla., that is operated and managed as a Canyon Ranch Living Hotel and Spa.

According to a news release, FL Spirits entered into an acquisition agreement with stalking-horse bidder 360 Miami Hotel & Spa LLC under which 360 would acquire the hotel lot, including the spa, and 13 condominium units for $12 million, subject to higher and better offers.

Upon closing of the transaction, the project will be managed by the Enchantment Group.

Under the proposed bid procedures, if 360 terminates the purchase agreement, it will receive its 10% deposit and up to $120,000 in third-party costs. Meanwhile, if 360 is not the high bidder, it will receive a $320,000 break-up fee, plus the $120,000 of termination expenses.

Competing bids, which are due 45 days after entry of a bidding procedures order, must be equal or greater to the amount of the stalking-horse bid, plus the amount of the break-up fee, plus a $100,000 overbid amount.

Bids at auction must be made in minimum increments of $100,000.

Lehman said the current operator of the hotel is not a debtor, and operations at the property are expected to continue without interruption, during and after any court-approved sale and closing.

Canyon Ranch Living is not affiliated with Lehman and is managing the hotel and condominium facilities under a management contract.

In connection with the bankruptcy filing, FL 6801 obtained a commitment for $5 million in debtor-in-possession financing from PAMI ALI LLC.

The facility will mature on the earliest of May 30, 2015, the effective date of a Chapter 11 plan, occurrence of an event of default and conversion or dismissal of the bankruptcy cases.

Interest will be the Prime rate plus 50 basis points.

The company is seeking interim access to $500,000 of the DIP financing.

According to court documents, FL 6801 has $10 million to $50 million in assets and $1 million to $10 million in debt.

The company is represented by Togut, Segal & Segal LLP.

A bid procedures scheduling hearing and interim DIP financing hearing is scheduled for June 3.

FL 6801 Spirits is a New York-based subsidiary of Lehman Brothers Holdings Inc., which was the fourth-largest investment bank in the United States. The Chapter 11 case number is 14-11691.

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