The Morgans Hotel Group (MHG), formerly
known as Ian Schrager Hotels, today announced that its San Francisco Clift
Hotel has successfully emerged from Chapter 11. None of MHG’s other
properties were involved in or affected by the filing.Ian Schrager, chief executive officer of MHG, said that under the plan of
reorganization approved by the court, all of the company’s lenders and trade
creditors will be paid in full and the company will receive $71 million in a
sale/leaseback transaction which will provide it with financing, under
attractive terms, to make additional improvements to the property.
The Clift’s emergence from Chapter 11 follows court approval of the
previously announced sale/leaseback transaction under which MHG will receive
$71 million, and MHG will retain a 99 year leasehold, as well as any profit
that might ensue from operations or a capital transaction.
“From our vantage point, this filing should have never occurred,” Mr.
Schrager said. “Although the Clift had financing in place to refinance 100%
of its debt, we were not able to obtain agreement from all of the hotel’s many
and diverse bondholders in a timely manner. Accordingly, in order to
facilitate the refinancing, we had no choice but to take this action.” Mr.
Schrager explained that while in out of court negotiations, 100% agreement is
needed from debt holders; under Chapter 11, agreement is required by only
2/3rds in amount and a majority in number.
“We said that it would be business as usual for the Clift when we filed,
that the filing was financial engineering and in both cases we were proven
correct,” Mr. Schrager said. “Guests never saw any difference in the quality
or level of service. Our staff continued to maintain the high standards for
which the Clift is known throughout the world.”
Mr. Schrager said that the Clift Hotel, along with the other MHG
properties, continues to outperform the market. He said that with the Clift’s
Chapter 11 behind it and its new financing in place, MHG can now concentrate
all of its efforts on continuing to grow and improve all of its properties.