March 21, 2023 – Further to agreements reached at a March 16th Plan confirmation hearing (as reflected in the March 17th Plan and amended confirmation order, see below), the Court hearing the Times Square JV cases issued an order confirming the Debtors’ Third Amended Plan of Reorganization [Docket No. 260].
Case Evolution
On December 28, 2022, Times Square JV LLC and three affiliated Debtors (“Times Square JV” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. At filing, the Debtors, owners and operators of a mixed-use property in central Times Square, which houses, among other things, the Crowne Plaza Times Square Manhattan Hotel, cited the pandemic and its pronounced impact in New York City as ultimately forcing them to seek bankruptcy shelter.
On January 19th, the Court hearing the Times Square JV cases issued an order approving bidding procedures in relation to a possible sale of the substantially all of the Debtors’ assets and as part of the aspirational “toggle” Plan announced by the Debtors at filing, with a sale path to be pursued if the Debtors determined that there was more value from a sale than from an “Equitization Restructuring.”
On February 3rd, the Court approved the adequacy of the Debtors’ Disclosure Statement which continued to provide disclosure as to the toggle Plan.
On March 2nd, the Debtors, having “received only one non-conforming bid for the Property and two bids for the Franchise Right….determined that an Equitization Restructuring would maximize value for the Debtors’ estates [and] elected to pursue the Equitization Restructuring.” NB: The prepetition, and now DIP, lender (an affiliate of Argent Ventures) is to receive 100% of the emerged Debtors’ equity in an Equitization Restructuring.
On March 17th, further to agreements reached with stakeholders at a Plan confirmation hearing beginning March 16th, the Debtors filed a Third Amended Plan of Reorganization. Amendments to the Plan, which paved the path for confirmation, included, inter alia, (i) changes agreed (or objections otherwise over-ruled) with the U.S. Trustee assigned to the Debtors’ cases as to third party release language and (ii) implemented via the Plan confirmation order, a path forward as to the ongoing adversary proceeding with Clear Channel Spectacolor, LLC as to the Plan’s treatment of a lease relating to billboard space at Debtors’ Times Square property.
Plan Overview
The Debtors' memorandum of law in support of Plan confirmation (the "Memorandum") [Docket No. 243] provides, “The Plan represents the result of significant compromise by and among the stakeholders in these Chapter 11 Cases and has been accepted by all classes entitled to vote. If confirmed, the Plan will ensure the continuation of go-forward operations at the Hotel with all of the attendant benefits — continued employment for hundreds of Union and Non-Union employees and a stronger business counterpart for the Debtors’ vendors, suppliers and customers.
Moreover, the Plan provides the only avenue to recovery for the Debtors’ creditors, including unsecured creditors and deposit holders, who will receive meaningful recoveries under the Plan, which they may not have received in a sale or liquidation. Holders of Allowed Ongoing Trade Claims will receive their pro rata share of a $975,000 cash pool, Holders of Allowed Other Unsecured Claims will receive their pro rata share of a $625,000 cash pool, and Individual Advanced Depositors will receive a credit valid for Hotel stays through December 15, 2023 [carving out holiday season], which, in the aggregate, represents over $2.5 million in consideration for Unsecured Claims, despite the impairment of the Secured Classes. This treatment under the Plan was the product of arms’-length negotiation between the Debtors, the Secured Lender and the Committee, which fully supports the Plan.
The Plan is also supported by Holiday Hospitality Franchising, LLC (‘HHF’), the counterparty to the Hotel’s License Agreement, which was rejected by the Debtors pursuant to the Order Granting Debtors’ Motion to Reject License Agreement with Holiday Hospitality Franchising, LLC, dated February 16, 2023 [Dkt. No. 197] (the ‘Rejection Order’). HHF will continue to provide transition services to the Reorganized Debtors until the Effective Date and, pursuant to the terms of the IHG Letter Agreement, Holiday and Reorganized TSJV will enter into a license agreement under which HHF will provide services on terms described in the IHG Letter Agreement to Reorganized TSJV following the Effective Date.
The Plan provides for the substantial reduction of the Debtors’ outstanding funded debt by approximately $217 million and the elimination of the Debtors’ annual cash debt service obligations. Pursuant to the Plan, the Debtors’ obligations under the DIP Facility, to the extent any such obligations are outstanding on the Effective Date, will be refinanced through an Exit Facility and the Mortgage Lender will provide access to up to an additional $160.5 million of liquidity, subject to conditions described in the Exit Facility Credit Agreement, to support the Reorganized Debtors’ Plan Payments and post-emergence operations. As a result of the foregoing, the Reorganized Debtors will emerge from chapter 11 with a capital structure that will support their growth and long-term viability.”
The following is an amended summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, see also the Liquidation Analysis below):
- Class 1a, 1b, 1c (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 2a, 2b, 2c (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 3a, 3b, 3c (“Mortgage Lender Secured Claims”) are impaired and entitled to vote on the Plan.
- Class 3a treatment: Each Holder will receive (1) if a Payout Event occurs, its (i) Pro Rata share of the Mortgage Lender Secured Cash Payment payable on the Effective Date or as soon as reasonably practicable thereafter, or (ii) such other less favorable treatment as agreed by the Debtors and the applicable Holder of a Mortgage Lender Secured Claim; or (2) if a Payout Event does not occur [it did not], its (i) (a) portion of the Exit Facility in an amount equal to the outstanding obligations of TSJV under the Mortgage Loan, taking into account the equitization of the Mortgage Loan set forth in section 4.2(a) and (b) Pro Rata Share, together with the holders of DIP Claims, of the Reorganized TSJV Equity Interests, or (ii) such other less favorable treatment as agreed by the Debtors and the applicable Holder of a Mortgage Lender Secured Claim.
- Class 3b Treatment: Holders will not receive any distribution on account of such Mortgage Lender Secured Claims against CPTS, and all such Mortgage Lender Secured Claims against CPTS will be cancelled and discharged.
- Class 3c Treatment: Each Holder will receive (1) if a Payout Event occurs, its (i) Pro Rata share of the Mortgage Lender Secured Cash Payment payable on the Effective Date or as soon as reasonably practicable thereafter, or (ii) such other less favorable treatment as agreed by the Debtors and the applicable Holder of a Mortgage Lender Secured Claim; or (2) if a Payout Event does not occur, its (i) portion of the Exit Facility in an amount equal to the outstanding obligations of the 1601 Broadway Owner under the Walber Parcel Mortgage Loan, or (ii) such other less favorable treatment as agreed by the Debtors and the applicable Holder of a Mortgage Lender Secured Claim.
- Class 4a, 4b, 4c (“Other Secured Claims”) are impaired and entitled to vote on the Plan and expected recovery for 4a, 4b and 4c is 24.5-34.5%.
- Class 4a Treatment: Each Holder will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 5a Claims) of Net Sale Proceeds at TSJV, or (y) if a Payout Event does not occur, 50% of its Pro Rata Share of the Ongoing Trade Claim Cash Pool [ie, $975k], and the right to payment of the remaining 50% of its Pro Rata Share of the Ongoing Trade Claim Cash Pool from the Disbursing Agent no later than six months after the Effective Date. Notwithstanding anything in the Plan to the contrary, each Holder of an Ongoing Trade Claim will receive its Pro Rata Share of the Ongoing Trade Claim Cash Pool promptly after the occurrence of the Effective Date, so long as no objection to the applicable Ongoing Trade Claim has been filed with the Court. If an objection has been filed with respect to any Ongoing Trade Claim, the Holder thereof may not receive their Pro Rata Share of the Ongoing Trade Claim Cash Pool until the later of the Effective Date and the date that is 10 Business Days after the date such Ongoing Trade Claim becomes an Allowed Claim.
- Class 4b Treatment: Each Holder will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 5b and Class 6 claims) of Net Sale Proceeds at CPTS; or (y) if a Payout Event does not occur, 50% of its Pro Rata Share of the Ongoing Trade Claim Cash Pool, and the right to payment of the remaining 50% of its Pro Rata Share of the Ongoing Trade Claim Cash Pool from Disbursing Agent no later than six months after the Effective Date. Notwithstanding anything in the Plan to the contrary, each Holder will receive its Pro Rata Share of the Ongoing Trade Claim Cash Pool promptly after the occurrence of the Effective Date, so long as no objection to the applicable Ongoing Trade Claim has been filed with the Court. If an objection has been filed with respect to any Ongoing Trade Claim, the Holder thereof may not receive their Pro Rata Share of the Ongoing Trade Claim Cash Pool until the later of the Effective Date and the date that is 10 Business Days after the date such Ongoing Trade Claim becomes an Allowed Claim.
- Class 4c Treatment: Each Holder will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 5c claims) of Net Sale Proceeds at the applicable 1601 Broadway Entity; or (y) if a Payout Event does not occur, 50% of its Pro Rata Share of the Ongoing Trade Claim Cash Pool, and the right to payment of the remaining 50% of its Pro Rata Share of the Ongoing Trade Claim Cash Pool from the Disbursing Agent no later than six months after the Effective Date. Notwithstanding anything in the Plan to the contrary, each Holder will receive its Pro Rata Share of the Ongoing Trade Claim Cash Pool promptly after the occurrence of the Effective Date, so long as no objection to the applicable Ongoing Trade Claim has been filed with the Court. If an objection has been filed with respect to any Ongoing Trade Claim, the Holder thereof may not receive their Pro Rata Share of the Ongoing Trade Claim Cash Pool until the later of the Effective Date and the date that is 10 Business Days after the date such Ongoing Trade Claim becomes an Allowed Claim.
- Class 5a, 5b, 5c (“Other Unsecured Claims.”) are impaired and entitled to vote on the Plan.
- Class 5a Treatment: Each Holder will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 4a Claims) of Net Sale Proceeds at TSJV, or (y) If a Payout Event does not occur, 50% of its Pro Rata Share of the Other Unsecured Claim Cash Pool [ie $625k], and the right to payment of the remaining 50% of its Pro Rata Share of the Other Unsecured Claim Cash Pool from the Disbursing Agent no later than six (6) months after the Effective Date.
- Class 5b Treatment: Each Holder will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 4b and Class 6 claims) of Net Sale Proceeds at CPTS; or (y) If a Payout Event does not occur, 50% of its Pro Rata Share of the Other Unsecured Claim Cash Pool, and the right to payment of the remaining 50% of its Pro Rata Share of the Other Unsecured Claim Cash Pool from the Disbursing Agent no later than six months after the Effective Date.
- Class 5c Treatment: Each Holder will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 4c claims) of Net Sale Proceeds at the applicable 1601 Broadway Entity; or (y) if a Payout Event does not occur, 50% of its Pro Rata Share of the Other Unsecured Claim Cash Pool, and the right to payment of the remaining 50% of its Pro Rata Share of the Other Unsecured Claim Cash Pool from the Disbursing Agent no later than six months after the Effective Date.
- Class 6 (“Individual Advanced Deposit Claims”) is impaired and entitled to vote on the Plan. Each Holder [ie hotel guests who made prepetition room deposits] will receive, (x) if a Payout Event occurs, its Pro Rata Share (together with Holders of Class 4b and Class 5b claims) of Net Sale Proceeds at CPTS, or (y) if a Payout Event does not occur, an Individual Advanced Deposit Credit in the amount of such Allowed Individual Advanced Deposit Claim. Notwithstanding anything in the Plan to the contrary, each Holder may exercise and redeem its Individual Advanced Deposit Credit promptly after the occurrence of the Effective Date, so long as no objection to the applicable Individual Advanced Deposit Claim has been filed with the Court. If an objection has been filed with respect to any Individual Advanced Deposit Claim, the Holder thereof may not exercise and redeem the applicable Individual Advanced Deposit Credit until the later of the Effective Date and the date that is 10 Business Days after the date such Individual Deposit Claim becomes an Allowed Claim.
- Class 7 (“Intercompany Claims and Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
- Class 8a, 8b (“Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.
- Class 7 (“Intercompany Claims and Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
Key Defintions:
- “Individual Advanced Deposit Credit” means a non-transferable credit against the applicable room rate at the Hotel valid for stays through December 15, 2023, subject to room availability and provided that such credit shall automatically expire unless a non-refundable booking to use such credit is made by the applicable Individual Advanced Depositor on or prior to September 1, 2023.
- “Ongoing Trade Claims Cash Pools” means an aggregate amount of $975,000 which shall be distributed to the Holders of Ongoing Trade Claims based on their Pro Rata Share of Allowed Ongoing Trade Claims against CPTS, TSJV and the 1601 Broadway Entities pursuant to Section 3.3(d), as applicable.
- “Other Unsecured Claims Cash Pools” means an aggregate amount of $625,000 which shall be distributed to the Holders of Allowed Other Unsecured Claims based on their Pro Rata Share of Allowed Other Unsecured Claims against CPTS, TSJV and the 1601 Broadway Entities pursuant to Section 3.3(e) of this Plan, as applicable.
Voting Results
On March 14, 2023, the Debtors' claims agent notified the Court of Plan voting results [Docket No. 246] which were as below:
Key Documents
The Amended Disclosure Statement [Docket No. 159] attached the following exhibits:
- Exhibit 1: Debtors’ Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
- Exhibit 2: Liquidation Analysis
- Exhibit 3: Restructuring Support Agreement
The Debtors filed Plan Supplements at Docket Nos. 214 and 217 which attached the following documents:
- Exhibit A: Transaction Election [Docket No. 214]
- Exhibit B: Identity of Members of the Board of Directors and of the Officers of the Reorganized Debtors [Docket No. 214]
- Exhibit C: Schedule of Assumed Executory Contracts and Unexpired Leases [Docket No. 214]
- Exhibit D: Form of Exit Credit Facility [amended at Docket No. 217]
Petition Date Perspective
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Shinder Declaration”), Richard J. Shinder, the Debtors’ president, detailed the events leading to Times Square JV’s Chapter 11 filing. The Shinder Declaration provides: “The filing of these Chapter 11 Cases is the culmination of a complex multi-year restructuring process….
The Debtors have struggled for years, even before the global COVID-19 pandemic (the ‘Pandemic’), which dramatically exacerbated those struggles. As described in greater detail below, in connection with the Pandemic, in an effort to attempt to curtail losses, the Hotel closed in March 2020 and just recently resumed operations on November 1, 2022.
While the Pandemic was the ultimate shock that forced the closure of the Hotel and left much of the Premises dormant, the roots of the Debtors’ distress run deeper. In particular, the Premises has been burdened by certain unfavorable contracts, primarily a license agreement dated July 1, 2012 (the ‘License 2 Agreement’) between Debtor CPTS, which operates certain businesses on the Premises including the Hotel and Signage Component, and Holiday Hospitality Franchising LLC (‘Holiday’), the licensing arm of InterContinental Hotels Group Resources, Inc. (‘IHG’). That licensing agreement, together with other contracts, have negatively impacted the Debtors’ revenues, the value of the Debtors’ business and the Debtors’ ability to meet their financial obligations.
In early 2020, the Debtors’ Mortgage Loan and separately the Mezzanine Loan (under which certain of the Debtors’ immediate parents are the borrowers) went into default as a result of a failure to pay certain amounts due thereunder. Since that time, the Debtors and various stakeholders, including 1605 Broadway LLC (the ‘Mortgage Lender’), an affiliate of Argent Ventures, LLC (together with its affiliates, ‘Argent’), have engaged in multiple efforts to restructure the Debtors.Among other things, these efforts led to the Debtors’ purchase of certain property underneath the Premises with funds extended by the Mortgage Lender, the restructuring of certain lease arrangements and entry into a restructuring support agreement (the ‘RSA’) with Vornado Capital Partners, L.P., Vornado Capital Partners Parallel, L.P. and Argent.
Importantly, the RSA provides a path to a restructuring, through a chapter 11 plan (the ‘Chapter 11 Plan’), which outlines the pursuit of the sale of the Premises and related rights (via the Chapter 11 Plan or under section 363 of the Bankruptcy Code) or an equitization of the Mortgage Lender’s secured debt. In sum, these Chapter 11 Cases will provide a path for an efficient resolution of the Debtors’ obligations and a stable foundation for a going concern….
As a result of certain defaults under the Mezzanine Loan Agreement, on September 1, 2021, the Mezzanine Lender exercised its rights with respect to the pledge of voting rights related to Debtors TSJV and CPTS (the ‘Voting Pledge’) pursuant to the Mezzanine Security Agreement. In doing so, the Mezzanine Lender, exercising the authority granted to members under the respective LLC agreements of Debtors TSJV and CPTS, (i) removed the officers and independent managers of Debtors TSJV and CPTS (which were previously appointed by Vornado), (ii) vested the management, direction, and authority of the business and affairs of Debtors TSJV and CPTS in a board of directors, and (iii) appointed me as the sole Director of Debtors TSJV and CPTS. Thereafter, the respective boards of Debtors TSJV and CPTS appointed me as President and Treasurer…My primary objective in these roles was to respond to the mounting financial difficulties by leading restructuring efforts a nd developing a plan for continued business operations.”
Restructuring Support Agreement
The Shinder Declaration further states, “In recent months, the Debtors have engaged with the Mortgage Lender and Vornado (together with the Mortgage Lender, the ‘Consenting Stakeholders’ or ‘RSA Parties’). On December 28, 2022, the RSA Parties executed the RSA regarding the material terms of a chapter 11 filing that would conclude in a sale transaction or restructuring. The RSA Parties have agreed to support the restructuring transactions set forth in the Chapter 11 Plan, which was filed contemporaneously herewith.
Among other things, the Mortgage Lender agreed to permit the Debtors to use cash collateral on a consensual basis and to provide post-petition financing to enable the Debtors to implement their restructuring process through confirmation of the Chapter 11 Plan, including to commence a marketing process for the sale of all or substantially all of the Debtors’ assets through the Chapter 11 Plan or separately under section 363 of the Bankruptcy Code….
The Chapter 11 Plan, as contemplated by the RSA, features a ‘toggle’ structure whereby, and on the same timing, the Debtors would pursue (a) a sale transaction (the ‘Sale Transaction’) through which all, or substantially all, of the Debtors’ assets would be sold and proceeds generated therefrom would be distributed to the Debtors’ creditors in accordance with the Chapter 11 Plan, or, in the absence of a Sale Transaction, (b) an equitization restructuring (the ‘Equitization Restructuring’) through which the Mortgage Lender would receive, among other things, 100% of the equity of the reorganized Debtors on account of the DIP Loan and a portion of the Mortgage Loan and other creditors would receive the treatment set forth in the Chapter 11 Plan. The decision whether to consummate the Sale Transaction or an Equitization Restructuring (the ‘Transaction Election’) will be disclosed in the Plan Supplement.
Prepetition Indebtedness
As of the Petition Date, the Debtors’ consolidated debt obligations totaled approximately $525,960,020, consisting of $521,722,926 in secured debt obligations and $4,237,094.46 in unsecured debt obligations. The following is a summary of the Debtors’ debt obligations as of the Petition Date:
Liquidation Analysis [See Exhibit 2 of Docket No. 174.2 for notes and better resolution]
About the Debtors
According to the Debtors: “Certain of the Debtors own and operate a building (the ‘Premises’) located at 1605 Broadway, New York, NY 10019 in central Times Square (between West 48th and 49th Streets). The Premises is a mixed-use real estate asset consisting, among other things, of certain hotel space on the 15th through 46th floors, currently branded as the Crowne Plaza Times Square Manhattan Hotel (the ‘Hotel’); 196,300 square feet of commercial office space (the ‘Office Space’), portions of which are currently leased to three third-party tenants; 17,800 square feet of ground floor retail space (the ‘Retail Space’); certain billboard spaces (the ‘Signage Component’); and a parking garage (the ‘Parking Garage’).”
Corporate Structure Chart
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