|By David Nicklaus, St. Louis
Post-DispatchMcClatchy-Tribune Regional News
Dec. 19, 2007 - The Kleenex folks have dipped into their pockets one more time to cover an interest payment for downtown's Renaissance Grand & Suites Hotel. There's reason to believe, though, that they might hold on to their cash next time.
Meanwhile, a consultant's report says the 5-year-old hotel will continue to struggle financially for at least five more years.
All of this lends new urgency to efforts aimed at refinancing the hotel's debt. It also may lead to a new debate over the adequacy of St. Louis' convention facilities.
That's a subject most St. Louisans thought was closed when the Renaissance opened. Our main deficiency, we were told for years, was the lack of a big hotel next to our convention center. Now we have that hotel but, according to C.H. Johnson Consulting of Chicago, it's losing money because St. Louis doesn't have enough meeting space.
The hotel won't make enough money to cover its debt payments until 2012, according to C. H. Johnson's new report. It projects that the fiscal gap will total $1.7 million in the next four years.
Moreover, the Renaissance probably won't be able to cover that gap the way it has handled previous shortfalls. Up to now, it has relied on reserves and contributions from its owners. But the debt-service reserve is down to just $100, and the owners have less reason to keep pumping in cash.
The hotel made a $3.5 million interest payment last week, but it needed an $829,000 loan from its lead owner, Kleenex maker Kimberly-Clark Corp., to do so. The owners have lent the Renaissance more than $2 million in the last 18 months, partly to avoid jeopardizing federal historic tax credits that they got when the hotel was being developed. The last of those tax credits will expire early next year, according to a report by Moody's Investors Service.
After that, Kimberly-Clark has little to lose, aside from its stake in a money-losing hotel.
Joey Mooring, a Kimberly-Clark spokesman in Dallas, would not comment on the status of the tax credits. He said any decision on whether to put up more cash "will be made closer to when the next payment is due." That would be in June.
If the owners shut off access to their deep pockets, the hotel will have few options. "In order to balance its cash flow and obligations, a bankruptcy filing may be inevitable," the Moody's report says.
The best way to avoid bankruptcy would be to restructure the Renaissance's $98 million in bondholder debt. For that to happen, bondholders would have to agree to reduce or stretch out interest payments. The hotel's owners would have to make concessions, too, and perhaps chip in additional cash.
Steven Stogel, a local developer, has been spearheading efforts to renegotiate the debt. The time for reaching an agreement is growing short, he said this week. "I'm getting closer, but close only counts in horseshoes and dancing," Stogel said.
If making the next interest payment is the Renaissance's biggest short-term problem, its biggest long-term problem is a lack of convention business in St. Louis. C.H. Johnson's report isn't optimistic on that front. It says that the hotel has too little meeting and ballroom space while America's Center, directly across the street, is losing business to newer and bigger convention halls in other cities.
What, if anything, can St. Louis do to keep up? We'll return to that issue in Friday's column.
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Copyright (c) 2007, St. Louis Post-Dispatch
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