Holiday Inn Express D.C.’s Chapter 11 bankruptcy case to be dismissed

By Sarah Lizee

Olympia, Wash., June 7 – Birchington, LLC, doing business as Holiday Inn Express Washington D.C. Downtown, received approval of a motion seeking dismissal of its Chapter 11 bankruptcy case, according to a minute entry filed Wednesday with the U.S. Bankruptcy Court for the District of Columbia.

As background, the debtor and related entities owe $74.3 million to lender Sschof II Washington DC, LLC under a real estate note secured by a deed of trust relating to the hotel property.

The debtors have been in default on the note since the start of May 2022.

After working through several months of attempted reorganization, the company reached a full and comprehensive settlement with the lender as to the property and related matters.

Under the settlement, the lender agreed to forbear from enforcing its rights with respect to the note through Dec. 31, 2023, subject to an extension to March 31, 2024 upon payment by the debtor of all accrued interest from May 2, 2019 through Dec. 23, 2023.

The debtor agreed to make monthly payments to the lender in the amount of $500,000 and, starting on June 15, all excess cash flow from the property will be paid to the lender, subject to the debtor maintaining a minimum cash balance of up to $250,000.

By no later than June 30, the debtor will fund an evergreen interest reserve in the amount of $250,000.

The lender agreed to waive receipt of 3% of the interest accrued at the default rate for the period beginning on the date of the agreement, but not interest accrued at the non-default interest rate or interest accrued at the interest rate plus 2%, provided that, after the agreement date, there are no uncured events of default and all amounts owed under the loan documents are satisfied in full on or before the end of the forbearance period.

The debtor also agreed to satisfy all past due property taxes within 90 days of the agreement date, and to pay the lender an amount equal to 1/12th of the estimated annual property taxes for the property.

The debtor also agreed to amend its operating agreement to provide for the appointment of an independent manager.

If the debtor files another Chapter 11 petition in the future, the lender will be entitled to relief from the automatic stay, and the debtors will waive their exclusive rights to file a plan of reorganization.

The debtor said that, following the filing of the settlement motion, the remaining tasks in the Chapter 11 case are ministerial in nature.

“The business judgment of the debtor to resolve this Chapter 11 case by an out-of-court workout by forbearance is simply a more efficient means of obtaining time and satisfactory terms to fulfill a refinancing or sale that will pay off the lender and likely all allowed claims within a reasonable time than would proceeding by a likely contested and even more expensive Chapter 11 plan reorganization basis,” the company said in the motion.

The Washington, D.C.-based hotel owner filed bankruptcy on Feb. 20 under Chapter 11 case number 23-00057.

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