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Bankruptcy Judge Orders an Examiner to Review Spending of Ex-Hilton's Books
Because of "Questionable" Payments from Hotel Accounts

By Kim Leonard, The Pittsburgh Tribune-ReviewMcClatchy-Tribune Regional News

Nov. 05, 2010--A bankruptcy judge on Thursday ordered that an examiner watch the books at the former Pittsburgh Hilton because of "questionable" payments from hotel accounts, and he cleared the way for a decision soon on whether the Downtown hotel can be reflagged as a Wyndham Grand.

Judge Jeffery Deller made the rulings after the hotel's mortgage holder, BlackRock Financial Management Inc., pressed for a Chapter 11 trustee be named to take control of operations.

"There have been questionable financial transactions in this case," Deller said, adding that after several weeks of sparring between attorneys for bankrupt hotel owner Shubh Pittsburgh Hotels LLC and New York-based BlackRock, he's trying to shift the focus back to putting the hotel on solid financial ground.

Deller ended Shubh's exclusive period to file a reorganization plan to settle matters with its creditors.

The120-day window is standard in bankruptcy cases, and the decision means BlackRock or other parties can come up with their own, competing plans. This could benefit creditors, Deller said.

BlackRock has been trying to foreclose on the 712-room hotel since just after Hilton Hotels & Resorts terminated its franchise license Sept. 2 over failed inspections and other problems. With a trustee in place, BlackRock could have executed a new franchise with Hilton to restore the name.

But Deller yesterday ordered attorneys to file arguments within seven days as to the adequacy of a Wyndham franchise. Wyndham Hotel Group has a deal with the owners to turn the hotel and conference center into a Wyndham Grand, but court approval is needed.

Dr. Kiran Patel, a Tampa businessman who acquired Shubh's equity in late September, said Deller "did a fair decision. He wants the court to focus on the asset and move forward."

Patel was disappointed that Deller is allowing competing plans to the one Shubh attorneys filed. That plan would continue to pay BlackRock 1.6 percent interest on its loan, as the current terms state. A "balloon" payment on the mortgage valued at $49.7 million is due in five years.

Shubh's and Patel's plan also would pay unsecured creditors, owed about $4 million, over a three- to four-year period with Patel backing the amounts if hotel revenues fall short.

But Deller pointed out that the plan doesn't clearly address paying BlackRock what it is owed.

The judge's order that the U.S. Trustee's Office line up an examiner for the hotel is a milder step than the appointment of a Chapter 11 trustee. An examiner will monitor and review financial receipts and report to the court, he said.

BlackRock attorneys have argued the hotel was mismanaged and revenue was "looted" while bills went unpaid.

Attorney David Rudov, representing Shubh, told Deller yesterday that the hotel could run short of cash as soon as next week. But Deller's order yesterday that hotel revenues be considered part of the bankruptcy estate eases the problem, he said later.

The cash crunch can be traced to a few problems. "The Steelers have been out of town for three weeks in a row," Rudov said, and "room revenue is starting to decline."

Pittsburgh's largest hotel also has operated without a tie to a major hospitality brand's reservations system. The hotel now called the Pittsburgh Grand isn't readily accessible through websites such as Travelocity, he said.


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