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Ritz-Carlton May Leave Island

Green Isle hopes to drop Marriott and hire Wyndham as hotel operator


January 17, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Green Isle Partners Ltd. S.E., owners of The Ritz-Carlton San Juan Hotel, Spa & Casino, is aiming to enter into an operating agreement with Wyndham Hotels, according to recent court documents obtained by CARIBBEAN BUSINESS.

As a result, Green Isle Partners is seeking to terminate the existing management contract The Ritz-Carlton San Juan Hotel has with Marriott International, parent company of the Ritz-Carlton brand.

Richard Cortese, vice president of Wyndham Resorts, and Andrew Wimsatt, vice president of hotel development in Washington, D.C. were unavailable for comment.

A source who spoke on the condition of anonymity said Green Isle could pursue three reorganization alternatives under Chapter 11 of the U.S. Bankruptcy Code–terminate connection with Ritz-Carlton and internally reorganize around a new license, sell the hotel, or restructure the Ritz-Carlton arrangement with a new partner.

Green Isle Partners, headed by entrepreneur Harvey Sandler, has not submitted the last three payments–Sept. 2000, March 2001, and Sept. 2001–due from an $85 million Afica loan subject to the guarantee of the Tourism Development Fund (TDF), in the aggregate amount of $9.1 million. The TDF was called upon to make the payments due to Banco Popular of Puerto Rico (BPPR), as trustee of the bonds, in order to keep the bonds current.

According to the court documents, Green Isle Partners does not dispute that it owes TDF the amounts it has funded to keep the bonds current. Although TDF notified Green Isle Partners of the commitment to repay TDF, each time it remitted the bond payment without starting litigation to collect the amounts due from the debtor.

Moreover, until the advent of Green Isle Partners’ bankruptcy, TDF has not sought to obtain financial information from the debtor since Sept. 2000. In addition to the Afica loan, a significant portion of the funding for both the initial construction of the hotel, as well as funding to cover operating losses and reserves were provided by Sandler in the aggregate amount of $31 million.

It had been reported earlier that Green Isle Partners in part blames Ritz-Carlton’s management for the hotel’s poor financial performance since it was inaugurated in late 1997. Other sources pin Green Isle Partners’ financial problems on the developer’s decision to rush the opening with only half of the room inventory ready and pouring too much money into the casino, both of which tallied losses of about $8 million in the hotel’s first year of operation.

U.S. Bankruptcy Court Judge Raymond Ray denied on Jan. 3 motions filed by Ritz-Carlton, the Government Development Bank (GDB), and BPPR requesting the case be transferred from Florida to Puerto Rico.

Judge Ray concluded that the aforementioned proponents failed to demonstrate by a preponderance of the evidence that the transfer of the Chapter 11 case to Puerto Rico would promote the economic and efficient administration of the estate or of the debtor’s reorganization efforts.

In June 2001, Green Isle Partners filed its petition for relief under Chapter 11. The debtor has retained possession of its assets and is authorized to continue the operation and management of its business as a debtor-in-possession, through its agent, Ritz-Carlton.

One month later, Ritz-Carlton filed a venue motion requesting entry of an order to transfer jurisdiction of the debtor’s bankruptcy from Florida to Puerto Rico. Several weeks later, the United States Trustee also filed a motion seeking identical relief to that requested by Ritz-Carlton along with the GDB, TDF and BPPR, who also filed their memorandum in support of the Ritz-Carlton motion. Also, Green Isle Partners filed in July 2001 its objection and response to Ritz-Carlton’s motion to transfer jurisdiction of the case.

In August 2001, the court conducted the initial evidentiary hearing on the venue motions. At the conclusion of the initial hearing, the court continued the evidentiary hearing on the venue motions to Sept. 2001. As a result of the closing of the court on Sept. 13, following the Sept. 11 terrorist attacks, the continued evidentiary hearings on the venue motions were rescheduled for Sept. 25.

This Caribbean Business article appears courtesy of Casiano Communications.
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