225 Bowery gets approval of disclosure statement, lender settlement

By Sarah Lizee

Olympia, Wash., April 26 – 225 Bowery LLC received approval of the disclosure statement for its Chapter 11 plan and a settlement with lender 225 Bowery Lender LLC, according to orders filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation hearing is scheduled for June 11.

The company said the settlement will allow the debtor to reorganize and exit Chapter 11 by the end of the second quarter.

It also maximizes the debtor’s ability to provide a distribution to unsecured creditors and avoid costly litigation with the lender, the company said.

The plan was amended to incorporate the settlement, which provides that the lender will have an allowed claim in the amount of $85.15 million and will be paid in full in installments.

On the effective date, the parties will execute loan documents that will include the following terms:

• The principal amount of loans on the effective date will be $85.15 million, prior to the application of principal payments;

• Interest will accrue at 9.75%, comprised of monthly interest of 7% per annum, payable on the first of each month, and PIK interest of 2.75%, payable on the maturity date or extended maturity date, as applicable;

• A maturity date of May 31, 2026, which can be extended for one additional year through May 31, 2027, in exchange for an $850,000 extension fee;

• No prepayment penalty, provided that the loans are paid in full as of the date of prepayment;

• Consent rights in favor of the secured lender with respect to any proposed change in use of the debtor’s hotel property; and

• Delivery of a deed instrument to the secured lender on the effective date and inclusion of a possession remedy in the approved loan documents.

The debtor will remit to the secured lender payments totaling $2.25 million, with $1.25 million to be paid on the date the settlement is executed, and $1 million to be paid on the earlier of May 31 and the date when the plan is confirmed.

The lender settlement also requires that the debtors abandon a previous settlement with David Paz, the current indirect equity owner and person in control of the debtor. The settlement included the transfer of equity in the reorganized debtor, subject to a marketing process.

According to the updated disclosure statement, holders of other priority claims, other secured claims, mechanic’s lien bond claims, mechanic’s lien claims and existing equity will receive full recovery.

Holders of $10.47 million in Ace secured claims will receive $3 million in cash and a subordinated note. This is expected to lead to a recovery of 28.6% to 37%.

Treatment of union claims is yet to be agreed on.

Holders of general unsecured claims are expected to receive a 27.5% recovery via their pro rata share of GUC reorganization payments made in four equal installments.

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

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