Owner of John Q. Hammons Hotels File for Bankruptcy Protection

by San Antonio Attorney

John Q. Hammons Hotels, a chain of hotels based in Missouri, recently filed for bankruptcy protection last Sunday.

Approximately 70 affiliates connected to the hotel chain also filed for protection in the Kansas Bankruptcy Court.  The hotel chain owns and co-manages 35 hotels such as Marriott, Sheraton and Hilton.  Each of these companies has an estimated asset and debt of more than $1 billion.

Mr. Hammons, a well renowned hotelier who passed away 2013, left behind a legacy of obtaining ownership of more than a hundred hotels in his lifetime.  A trust, revocable form that possesses the ownership of 35 hotels, also filed for bankruptcy protection.  The petition for bankruptcy was co-signed by trustees Jacqueline Dowdy and Greggory Groves, who serve as the chief executive and general counsel respectively.

The bankruptcy filing involved a hotel group that also had ownership of Mr. Hammons.  This occurred after the 2005 buyout of the business by Jonathan Eilian, the previous managing director of Starwood Capital Group.

The buyout, which was held last 2015, involved 43 hotels owned by Mr. Hammons.  He received the equity interest of the company and a partnership with Mr. Eilian.

The deal had a very complex structure, which obligated Hammons to receive cash without any capital gains taxes.

After the death of Mr. Hammons that eventually led to a liquidation of the partnerships of Messrs, Hammon and Eilian, the Delaware court ruled in the right of first refusal, which stipulated that the trust will be sell the remaining chains of hotels to Mr. Eilian.

However, the Hammons trust and companies were deemed to be serial and ongoing breachers who did not make any effort to sell the hotels, according to Vice Chancellor J. Travis Laster.

 

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