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New Owner of Former Pittsburgh Hilton Outlines Reorganization Plans

By Mark Belko, Pittsburgh Post-GazetteMcClatchy-Tribune Regional News

Oct. 07, 2010--A Tampa cardiologist and owner of the former Hilton Pittsburgh filed a formal plan Wednesday to rescue the Downtown hotel from bankruptcy and fully repay creditors over time.

The reorganization plan filed by Shubh Hotels Pittsburgh and Pittsburgh Grand LLC, an affiliate of Dr. Kiran C. Patel, also would reposition the hotel as a Wyndham Grand, the luxury brand of Wyndham Hotels & Resorts, after 51 years as a Hilton.

Under the plan, the new ownership under Dr. Patel would post $8 million in letters of credit to pay off creditors if hotel revenues are not sufficient to do so.

However, BlackRock Financial Management Inc., the lender who foreclosed against Shubh on Sept. 3, cast a skeptical eye on Dr. Patel in papers filed Wednesday.

It argued that Dr. Patel was an "insider" at the financially troubled hotel long before Shubh filed for bankruptcy Sept. 7, and that he exercised "control directly or indirectly" over operations at the former Hilton.

The reorganization plan and other filings came on the eve of a hearing today in U.S. Bankruptcy Court on a bid by BlackRock to get approval to foreclose on the hotel property, an action that was delayed when Shubh filed for bankruptcy.

Under the reorganization plan, secured creditors, with claims totaling more than $800,000, including taxing bodies, would be paid in full from hotel revenues over a period of 36 months.

Most priority claims would be paid from the same source over the same period of time. The plan is less precise about $4.1 million in general unsecured claims, saying they would be paid off in quarterly installments over a "period of time," to be determined by the total number of allowed claims in the class.

Most creditors are contractors, vendors, unions, and taxing bodies that have not been paid by the hotel.

The plan states that payments would come from hotel revenues backed by $8 million in letters of credit procured by Pittsburgh Grand. It estimates that the hotel should generate almost $30 million in cash flow over five years, more than enough to make the payments.

The letters of credit would kick in if the hotel fails to reach at least 85 percent of projected cash flow in any quarter.

David Lampl, an attorney who represents the unsecured creditors committee, said he anticipates entering negotiations with the new ownership over the timing of payments to creditors.

Under the plan, Dr. Patel would continue to make payments on the $49.6 million mortgage held by BlackRock. David Rudov, attorney for Shubh and Pittsburgh Grand, said Shubh is now fully owned by Dr. Patel, based on a transfer that occurred last month. Atul Bisaria, the former owner, is no longer involved, he said.

The new owner is hoping to get approval from the court today on a deal with Wyndham to become the hotel franchise. With the change, Dr. Patel is pledging to finish an exterior addition that has been stalled for nearly 18 months and to add conference space, an indoor pool, a luxury spa and new restaurant and retail space.

He will provide a $4 million completion bond to ensure that the work is done, the plan stated.

But in a filing intended to boost its case for foreclosure, BlackRock painted Dr. Patel as anything but a white knight. It argued that the cardiologist, through Tampa Hospitality Management LLC, was involved in managing the hotel in 2009.

It also said that other "Patel affiliates," such as the Fuel Group, Black Diamond Hospitality and its CEO Jai Lalwani, "exercised some type of management" over the hotel during its troubles.

Dr. Patel, in a written response to questions by BlackRock, said Tampa Hospitality operated the hotel for three weeks in 2009 after the hotel's accounts were garnisheed by creditors. During that time, he said he loaned money to fund payroll and operating expenses.

He also said he has made loans to firms controlled by Mr. Lalwani in the past, but stated he is not chairman of the board of Black Diamond, as he is listed on its website.

BlackRock also charged that "Patel managers" made a $20,000 charity contribution last summer to Touch Heaven Ministries headed by Frank Amedia, who currently serves as the hotel's asset manager.

Mr. Amedia said the donation came before he was involved in the hotel and was used for relief work Touch Heaven is doing in Haiti. He said the hotel knew of the work through Mr. Lalwani. He said Dr. Patel had nothing to do with it.

"This is mudslinging of the lowest degree," Mr. Amedia said of the BlackRock filing. "It's contemptible."

BlackRock also stated the ownership transfer from Mr. Bisaria to Dr. Patel was unauthorized and was designed to circumvent court and lender approval and stop the foreclosure. Shubh attorney Jonathan Kamin said the change was required by Wyndham.

"The transfer was done in order to facilitate the reflagging of the hotel and to put the hotel ownership firmly in the hands of a strong capital partner," he said.

Mark Belko: or 412-263-1262.


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