|By Mark Belko, Pittsburgh
Post-GazetteMcClatchy-Tribune Regional News
March 05, 2011--A Tampa cardiologist seeking to take over the former Hilton Pittsburgh has said that all he wanted was a chance to show what he could do. He may finally get it.
After months of quarreling, Dr. Kiran C. Patel and New York lender BlackRock Financial Management Inc. have reached a formal settlement in their battle over the Downtown hotel.
The agreement could pave the way for the hotel, the city's largest, to emerge from Chapter 11 bankruptcy protection by the end of May. It also should serve to get a long-stalled construction project at the hotel's front door rolling again.
Under the proposed settlement, Dr. Patel would stay in control of the hotel. Rather than revert back to a Hilton, the flag for half a century, it would remain a Wyndham Grand under the Wyndham Hotels and Resorts chain.
Wyndham also would manage the hotel and have control over the cash flow, according to a settlement motion filed Friday in U.S. Bankruptcy Court in Pittsburgh.
As part of the deal, Dr. Patel has agreed to pay BlackRock a $10 million "settlement fee" that would be used in part to reduce the $49.6 million mortgage on the property.
The payment would be funded by a $10 million second mortgage on the hotel, said James Gassenheimer, Dr. Patel's attorney.
In addition, the settlement calls for the use of a BlackRock-controlled construction reserve fund, which contains about $1.5 million, to help complete an unfinished exterior addition that has marred the front of the hotel and the entrance to Downtown for nearly two years.
Dr. Patel and Wyndham are required to spend $1 million on the project before the reserve can be used, according to the deal.
"The adversary litigation between Dr. Patel and BlackRock is settled. BlackRock has agreed to stay in as the hotel's primary lender. Instead of spending huge sums of money on lawyers and litigation, we can now work on what's best for Pittsburgh and the hotel," Mr. Gassenheimer said.
U.S. Bankruptcy Judge Jeffery A. Deller still must approve the settlement. Dr. Patel also must file an amended reorganization plan reflecting the revised terms and creditors must vote on it.
"[The settlement] is a very positive development and we're hopeful that it will result in a confirmed plan of reorganization and the completion of the hotel construction," said Robert Simons, an attorney for BlackRock.
One key hurdle remains. Dr. Patel still must settle with creditors who are owed tens of millions of dollars for work or services they have provided the financially struggling hotel.
In his previous plan of reorganization, Dr. Patel proposed paying off most creditors in full over a period of several years. That, however, could change under a revised plan, particularly in light of the $10 million payment he is making to BlackRock.
Mr. Gassenheimer said Dr. Patel is in negotiations with creditors in an attempt to resolve claims. He said some claims may still be paid in full but acknowledged that others may not be. Dr. Patel, he noted, believes that some claims could be overstated.
"We remain optimistic that we will be able to reach a resolution with the vast majority of the creditors," he said.
David Lampl, attorney for the committee of unsecured creditors, said he believes creditors ultimately will be offered a choice between taking a lesser amount up-front or a higher amount over time. "I'm optimistic that we will be able to come to a resolution of the last piece of this puzzle," he said.
The proposed settlement marks a stunning turnaround in a case that had been filled with animus almost since the Chapter 11 bankruptcy petition was filed in September.
So great was the acrimony that Judge Deller appointed a trustee to oversee operations at the hotel on Jan. 31.
Mr. Simons said that decision ultimately may have helped to facilitate the settlement because it "permitted an even playing field for discussions." Before that, Dr. Patel had control over the hotel.
The $10 million payment, he said, decreased BlackRock's exposure and "was very influential in the lender's decision to settle."
Shubh Hotels Pittsburgh, then owner of the hotel, filed for bankruptcy after Hilton Hotels & Resorts terminated its franchise license agreement. That prompted BlackRock to declare Shubh in default of its $49.6 million mortgage and move to foreclose. Dr. Patel later became equity owner of Shubh.
Susan Scattaregia, a hotel employee who is vice president of Unite Here Local 57, which represents many of the workers, said employees are "pretty optimistic" about the settlement.
"We're just ready to move into the future and hopefully get this all behind us," she said.
Mark Belko: email@example.com or 412-263-1262.
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