The economy in downtown St. Petersburg may be on the upswing, but so far it has been unable to lift the St. Petersburg Hilton & Towers out of financial hot water.
The owner of the 23-year-old hotel Wednesday filed for Chapter 11 bankruptcy to protect the Hilton from creditors and allow time to reorganize its debts. The owner, St. Petersburg Harbour View Hotel Corp., listed assets of $14.6-million and liabilities of $19.5-million.
The Hilton's step into bankruptcy is hardly new territory. The 333-room, 15-story hotel has been financially plagued since it opened in 1971. It first filed for bankruptcy in 1982 and even closed briefly in 1985.
But Wednesday's actions will not affect the ongoing operations of the Hilton, said Gerard Von Dohlen, president of the Harbour View ownership group, an affiliate of Seaway Hotel Corp.
"The Hilton will continue to operate as it has and will be run by the same people," Von Dohlen said.
The bankruptcy filing was pre-emptive. As attorneys for the Hilton sought bankruptcy relief in Tampa, attorneys for the hotel's bondholders were in Clearwater asking a Circuit Court judge to approve their request to foreclose on the hotel.
The bankruptcy filing delayed any foreclosure action pending another hearing on March 30 in U.S. Bankruptcy Court in Tampa.
With additional time, the Hilton can solve its financial woes, Von Dohlen suggested. The Hilton is slowly benefiting from the improving economy and a modest recovery in business travel, he said.
That, plus an agreement last month to provide rooms to Delta Air Lines employees traveling through Tampa International Airport, has helped boost occupancy rates from 56 percent in 1993 to 70 percent in January.
"We have positive cash flow now, but it is not enough to support existing debt," Von Dohlen said. To reduce its heavy debt, the Hilton needs its bondholders to agree to take a "substantial discount" on the face value of their bonds, he said.
The owner of the Hilton currently owes bondholders about $12-million in principal and interest. About $8-million of the Hilton bonds, comprised of tax-free industrial development bonds, are held in a mutual fund managed by an arm of Prudential Insurance Co. of America.
"Prudential is trying to protect its mutual fund shareholders," said Jerry Webman, a managing director at Prudential Investment Advisers in Newark, N.J.
The Hilton has not paid interest on those bonds since May 1990.
The bondholders, who are represented by First Union Bank as trustee, hold the first mortgage on the Hilton. Had First Union succeeded in foreclosing on the Hilton, the hotel probably would have been sold, said Robert Glenn, a Tampa attorney representing First Union.
A second mortgage on the Hilton had been held by New Jersey's Carteret Savings Bank. When Carteret failed, its lien on the hotel fell into the hands of the federal Resolution Trust Corp.
The city of St. Petersburg in 1986 provided the Hilton with a $3.4-million Urban Development Action Grant. The city is now the third lien holder behind the bondholders and the RTC and would probably not recover any of those funds in the event of a foreclosure, said Rick Badgley, a lawyer for the city.
"The city's main interest is that the hotel stay up and running," he said.
The bankruptcy filing also delayed an attempt by the hotel bondholders to tap another source of funds: the St. Petersburg Hilton's sister hotel, the Sheraton Sand Key Resort in Clearwater. Both hotels are owned by Seaway Corp.
According to the bankruptcy filing, Seaway had pledged the financial resources of the profitable Sheraton Sand Key to guarantee any operating losses sustained by the Hilton.
The Sand Key is trying to assemble financing to provide Seaway with new equity that can be invested in the Hilton, the filing said.
Bondholder efforts to secure a judgment against the Clearwater hotel would imperil any new investment in the Hilton and could hurt the Sheraton Sand Key, it said.
That battle will be decided in bankruptcy court.
St. Petersburg Hilton's rocky road
1971: The $8.5-million St. Petersburg Hilton opens in the city's downtown at 333 First St. S.
1978: Hotel is sold and renamed the Bayfront Concourse.
1981: A Playboy Club opens in the hotel in an attempt to attract more business.
1982: Hotel files for Chapter 11 bankruptcy to protect itself from creditors.
1985: Hotel is closed after a financial dispute.
1986: Hotel is purchased for $4.2-million and regains Hilton name. Extensive renovations occur with city providing $3.4-million from a federal grant and issuing $9.9-million in tax-free industrial development bonds.
1994: Hilton owner St. Petersburg Harbour View Hotel Corp. files for Chapter 11 bankruptcy protection to halt foreclosure proceedings by bondholders who have not been paid interest since May 1990.
Source: Times files