Updated: Colony files for bankruptcy

 

Updated: Colony files for bankruptcy

 

Date: October 7, 2009
by: Kurt Schultheis | City Editor

 
 

The Colony Beach & Tennis Resort’s hotel-operating entity filed for Chapter 11 bankruptcy Monday, Oct. 5, in the Tampa-based U.S. Bankruptcy Court’s Middle District of Florida.

The news comes two weeks after the Colony, in its 40th year of business, closed the doors to its hotel operations until further notice.

Colony President and General Manager Katie Moulton said the hotel corporation, Colony Beach & Tennis Club Ltd., would reorganize the limited partnership her father oversees in bankruptcy court “to protect the long-term viability of the resort.”

The resort is made up of a condominium-hotel operated by a limited partnership, which Moulton said is dependent on the cooperation and funding of certain expenses of the condominium buildings and common areas by its condominium association. 

“It’s not something we had hoped or planned to do, but we were forced into making this decision,” said Moulton, referring to the condominium association’s decision not to pay for and fund certain expenses.

The bankruptcy filing does not affect the operation of The Colony Dining Room, The Monkey Room Bar and the restaurant’s catering division.

In a press release issued late Monday, Moulton said the association’s decision not to fund certain expenses was an attempt to force the general partner to surrender the resort to the association.

“For now, this is the best decision to protect the partnership and the assets of our unit owners,” Moulton said. “We are hopeful the action we are taking is a positive step for the Colony, our vendors, resort guests and any employees who may be owed any money.”

Moulton said the Chapter 11 filing is the best way “to make sure everything is made whole once again,” while efforts are still made to find qualified investors who are interested in revitalizing the facility.

Colony Association Board Vice President Jay Yablon declined to comment on the bankruptcy filing.

In a prepared statement, Colony Chairman and owner Dr. Murray “Murf” Klauber, also general partner of the resort, explained his reasoning for the bankruptcy filing.

“This was an extremely difficult and challenging decision to make; however, with the compelling counsel from our experts, we feel this step is essential in allowing the Colony to recover from the financial distress the association has forced upon the resort,” Klauber said.

Tampa attorney Roberta Colton, who was hired by the Colony to represent the bankruptcy filing, said she could not comment on a pending case.

What happens next?
The shuttering of the hotel was made two months after federal bankruptcy Judge K. Rodney May — who was also assigned the Colony’s hotel bankruptcy filing on Monday — ruled the association’s board does not have to assess unit owners $14.1 million in resort repair costs.

Foreclosure proceedings are also ongoing in Sarasota County against Klauber and seven of his resort corporations, alleging they have defaulted on three loans whose outstanding amounts total $8.02 million.

On Friday, Oct. 2, the Colony withdrew its appeal of the foreclosure proceedings.

By filing for bankruptcy, however, area bankruptcy attorneys say the Bank of America foreclosure proceedings are frozen for the time being.

A list of creditors filed in bankruptcy court reveals that the hotel’s operating corporation owes approximately $1 million to the 20 largest unsecured creditors. Thousands of dollars are also owed to several other creditors listed in the bankruptcy filing.

For now, the Chapter 11 bankruptcy filing, which could take up to 18 months to reach a conclusion, puts the debts on hold until May makes a decision in the case.

Bradenton bankruptcy attorney Benjamin “Skip” Martin said Chapter 11 is commonly used for businesses that want to restructure, reorganize their debt and continue to operate in the future.

‘There is an automatic stay that will prevent any current litigation from going forward,” Martin said.

The bank, however, has the right to ask May to remove the stay and permit the bank to continue its action to foreclose, Martin said.

To view a list of The Colony's 20 largets unsecured claims, please click here.

 

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