John Q. Hammons Hotels & Resorts yesterday filed for Chapter 11 bankruptcy, a move that puts on hold legal action filed by former investor and rival Jonathan Eilian.
“At this point, all litigation proceedings are halted,” JQH Vice President and General Counsel Gregg Groves said this morning during a news conference at University Plaza Hotel and Convention Center. “The purpose of this restructuring is to allow us to work through the time-consuming litigation that we have faced since back in 2012.”
J.D. Holdings LLC – Eilian’s holding company that 11 years ago helped privatize Hammons’ publicly traded company – has the first right of refusal regarding properties Hammons developed outside of the scope of the public company. The 2005 agreement gave Eilian’s holding company indirect ownership of 43 Hammons’ hotels and management of 15 others. The bankruptcy filing comes about a month before a trial was set with Eilian over whether his company can purchase JQH Hotels’ remaining 35 properties in 16 states.
Groves said the sale of the 35 hotels could not happen unless JQH Hotels is paid $335 million owed for Hammons’ stock when the company was privatized. He also said the company has argued the 35 hotels at risk are not at odds with the 2005 agreement.
Reading from a prepared statement, CEO Jacquie Dowdy said the company is “financially stable” and the restructuring would help the company keep Hammons’ legacy alive.
“We have a legacy of excellence that we are committed to maintain, but increasingly, we have been restricted by legal roadblocks arising in the litigation,” Dowdy said this morning. “A financial restructuring associated with Chapter 11 will help to provide the necessary framework and safeguards to let us be there for our creditors, vendors, employees, guests and members of the community who benefit from the continued generosity of the legendary hotelier.”
Six bankruptcy documents with the JQH name were filed yesterday in U.S. Bankruptcy Court in Kansas City, Kan. Listed in the documents are more than 70 affiliates, which together claim assets and debts each of more than $1 billion. The
Wall Street Journal was first to report the bankruptcy.
Hammons, who died three years ago, started his lodging career in 1958, partnering with Roy Winegardner to purchase their first 10 properties under the Holiday Inn franchise. Winegardner & Hammons went on to construct nearly three dozen Holiday Inn properties before JQH Hotels was formed in 1969. JQH Hotels operates hotels under brands including Holiday Inn, Embassy Suites and Marriott, as well as its downtown University Plaza Hotel.
Earlier this month,
Springfield Business Journal reported JQH lost University Plaza General Manager Robert Henley to Atrium Hospitality, which is owned by Eilian.
