Naples Bay Resort, a four-star Florida hotel, is reportedly facing an unwanted Chapter 7 bankruptcy. An involuntary bankruptcy petition has been filed by its creditors, and a temporary trustee has been appointed. A final decision as to whether the involuntary bankruptcy will proceed will be made shortly.
Being forced into bankruptcy is clearly not the first choice for three of the four partners who developed the property, which is already in receivership. They would prefer to continue operating under the guidance of the court-appointed receiver. According to their attorney, the three partners have obtained a financing commitment that could allow the resort continue to operate, at least until the end of the year.
The fourth partner, who is also a creditor of the resort, is pressing for the involuntary Chapter 7 and rejects the financing commitment obtained by the other three partners as inadequate. Rather than continuing in receivership, the fourth partner would prefer to have a trustee appointed through the bankruptcy court to obtain stable, long-term financing. Management of the resort also supports the need for federal bankruptcy protection.
Although Chapter 7 business bankruptcy generally involves liquidation of the organization’s assets and closing down the business, those pressing for the bankruptcy believe it could stabilize the resort’s financial situation.
The resort may have to begin the process of closing down beginning in December if these issues are not immediately resolved.
Will the bankruptcy move forward, or will the proposed alternate financing be deemed adequate to keep the resort open through 2011?
As this story shows, the decision to seek business bankruptcy protection can be contentious, even among partners, and the counsel of an experienced business bankruptcy attorney may be able to help organizations make that decision strategically.
Source: Naplesnews.com, “Naples Bay Resort developers argue against bankruptcy,” Pete Bishop, Oct. 31, 2011