225 Bowery lender blasts new plan, moves to end exclusivity

By Sarah Lizee

Olympia, Wash., March 27 – 225 Bowery LLC lender 225 Bowery Lender LLC has asked for the company’s exclusive periods to file and solicit votes on a Chapter 11 plan to be terminated, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

The lender said it is “deeply disturbed” about the current trajectory of the case.

In August and September of 2023, the debtor, which owns hotel property in Manhattan, and lender worked on an agreement in principle on the terms of a consensual plan. The debtor started to implement the terms, including by getting authorization to make a first-tranche adequate protection payment.

In February, the debtor realized that it wouldn’t have enough cash flow to meet the terms of the agreement due to a significant difference between the debtors’ actual performance and its projected performance, coupled with a professional fee burn, the lender said.

“Instead of approaching with secured lender with proposed modifications to the treatment of the secured lender claim, the debtor rewarded the secured lender’s faith in and reliance on the debtor by stabbing the secured lender in the back and filing the ‘Paz’ plan, which by all measures is an about face on the parties’ agreement in principle,” the lender said in the objection.

The lender said the plan only benefits David Paz, the current indirect equity owner and person in control of the debtor and related entities.

The plan returns control of the property to the Paz parties while also eliminating all other equity holders in the debtor and placing 100% of the equity in the reorganized debtor in the hands of Paz, the lender said.

The lender noted that the plan’s terms include wiping out tens of millions of dollars in debt and equity, granting broad releases to Paz and related individuals, granting 75% of the net proceeds under the plan to Paz, and gifting a 20% pro rata share of the 25% of net proceeds earmarked for general unsecured creditors under the plan, among other things.

“The Paz plan is nothing short of a stunning abandonment by the debtor of its fiduciary duties to all creditors, which has left the secured lender with no choice but to take matters into its own hands to effectuate a course correction and fill in various informational gaps and blind spots that the debtor itself created and correct the debtor’s false narrative,” the lender said.

The New York-based hotel property owner filed Chapter 11 bankruptcy on Jan. 24, 2023 under case number 23-10094.

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