Williamsburg Hotel: Court OKs appointment of Huebscher as examiner

By Sarah Lizee

Olympia, Wash., Nov. 16 – 96 Wythe Acquisition LLC, the owner of the Williamsburg Hotel in Brooklyn, N.Y., had Eric M. Huebscher appointed as examiner to its bankruptcy case, according to an order filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

Region 2 U.S. trustee William K. Harrington and lender Benefit Street Partners Realty Operating Partnership, LP had both filed motions seeking the appointment, as previously reported.

Benefit Street said the debtor’s recently proposed plan of reorganization provides for blanket releases from all estate and creditor claims against insiders and their affiliates under a settlement negotiated “between themselves, for themselves, and without input from any unconflicted fiduciary.”

In exchange, the insiders will return diverted funds and make a small additional equity contribution to retain the equity in the debtor, while purporting to pay creditor claims over three to six years.

“The debtor grants these blanket releases even though no independent fiduciary has investigated such claims, much less concluded that the amount the insiders purport to contribute approximates the value of the equity they will receive together with the value of the claims against them that are being released,” the lender said.

The court had denied the U.S. trustee’s earlier motion seeking either conversion or dismissal of the case.

“While the court may not have found sufficient basis, at this time, to convert the case to Chapter 7 or appoint a trustee, there can be no dispute that multiple conflicts of interest exist, and that the insider-sponsored plan would release all potential claims without any independent review or oversight,” Benefit Street said.

“The need for an examiner, an independent fiduciary, to conduct a proper investigation is clear in the case of such plan releases, especially where, as here, there is no statutory committee or other independent fiduciary to investigate these claims and assess their value as part of the plan process.”

The Brooklyn, N.Y.-based hotel owner filed bankruptcy on Feb. 23, 2021 under Chapter 11 case number 21-22108.

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