|By Josh McCann, The Island Packet, Hilton
Head Island, S.C.McClatchy-Tribune Regional News
Nov. 19, 2010--The owner of the Westin Hilton Head Island Resort & Spa has filed for bankruptcy protection to avoid foreclosure.
Transwest Resort Properties of Tucson, Ariz., sought the protection Wednesday under Chapter 11 of the U.S. Bankruptcy Code, which allows a company to propose a plan to reorganize, keep its business open and pay creditors over time.
Transwest's bankruptcy filing came after subsidiaries defaulted on a loan and as lenders were "working toward the imminent appointment of a receiver," according to court documents.
Transwest also owns the Westin La Paloma Resort and Country Club in Tucson.
Officials at the 412-room Hilton Head resort said it will continue to operate while Transwest seeks to pay off a $209 million loan it took out to finance improvements at the two hotels.
"It's business as usual," director of sales and marketing Ken Nason said. "This is a filing between the owner and the bank."
Financial analysts had warned that Transwest was in danger of defaulting on the loan in 2008.
Although the resorts make enough money to cover operations, they do not make enough to justify their present levels of debt, according to court documents.
The resorts employ more than 700 people and are managed by Starwood Hotels and Resorts Worldwide of White Plains, N.Y. The Hilton Head workforce ranges from about 200 to 400 people, depending on the season, Nason said.
Occupancy at the resort has grown slightly in 2010 compared to the previous year, and room rates are stabilizing, Nason said. The resort should set a record this year for leisure occupants, and corporate groups that shied away from resorts during the recession are starting to return, he said.
Nason declined to provide specific figures.
Without the loan, Nason said, the resort is "an operating business that does quite well."
The debtors said in court documents that reorganization will enable the resorts to avoid liquidation; complete a three-year, multimillion-dollar capital improvement plan; and maximize their ability to pay creditors.
An attempt Thursday to reach Transwest officials for comment was unsuccessful.
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Copyright (c) 2010, The Island Packet, Hilton Head Island, S.C.
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