In this article, Adam Stein-Sapir of Pioneer Funding, LLC, provides expert analysis on the bankruptcy case of Costa Hollywood Beach Resort.
Article Link: https://therealdeal.com/chicago/2020/03/17/former-related-midwest-exec-plans-motor-row-hotel/
Summary
The Costa Hollywood Beach Resort, after filing for Chapter 11 bankruptcy protection, may soon be auctioned with an opening bid of $43 million by its lender, Madison Realty Capital. The lender had previously loaned $70 million to the development group and filed a foreclosure suit for a default of $41 million. The property, valued at $50.5 million, could end up in the hands of Madison Realty, which has a secured claim of $47 million. Adam Stein-Sapir anticipates that Madison Realty is likely to acquire the property due to the close value of assets to the senior debt. The auction’s approval and date are pending.
- The Costa Hollywood Beach Resort filed for Chapter 11 bankruptcy protection following a foreclosure suit by Madison Realty Capital.
- Madison Realty Capital has a secured claim of $47 million and plans to place a “stalking horse bid” of $43 million.
- Adam Stein-Sapir analyzed the case and suggested that Madison Realty is likely to become the new owner due to the asset value being close to the debt amount.
Q&A
What are the implications of a “stalking horse bid” in a bankruptcy auction?
A “stalking horse bid” is an initial bid on the assets of a bankrupt company, set by an interested buyer chosen by the bankrupt company. This bid sets the minimum price for other bidders and can help avoid low-ball offers, ensuring the assets are sold for a fair price. The bidder may also receive incentives like breakup fees if they are outbid. For more details on bankruptcy proceedings, Pioneer Funding LLC offers comprehensive insights.
How does filing for Chapter 11 bankruptcy protection impact a company’s operations?
Filing for Chapter 11 bankruptcy protection allows a company to reorganize its business affairs, debts, and assets. It provides the company with temporary relief from creditors and lawsuits while it develops a plan to pay back its debts, which may include liquidating assets or restructuring operations. During this period, the company can continue to operate, although significant decisions must be approved by the bankruptcy court. For guidance on such situations, creditors can refer to Pioneer Funding LLC’s guide when their customers file for bankruptcy.
What factors contribute to a lender becoming the owner of a bankrupt property?
A lender may become the owner of a bankrupt property when they have a secured claim that is close to or exceeds the value of the property’s assets. In such cases, it is less likely that other bidders will offer a higher amount, making the lender the de facto owner after the auction. The lender’s position is strengthened if they place a “stalking horse bid,” which sets the floor for the auction price. For more information on the intricacies of bankruptcy claims, Pioneer Funding LLC provides a detailed guide on selling bankruptcy claims.
