The Milwaukee Marriott Downtown hotel received approval from a bankruptcy court Wednesday to use use hotel revenue to pay all hotel expenses incurred in the ordinary course of business, including to its employees and vendors.
The 205-room hotel at 625 N. Milwaukee St. also received approval to continue to honor all customer reservations and deposits.
Both motions are in an effort to keep the hotel’s Chapter 11 bankruptcy proceedings “invisible to the public” as the business moves to restructure its debt.
“We hope and believe that during this bankruptcy restructuring process that the public will not notice any change whatsoever to the excellent service that they have come to expect from the Milwaukee Marriott Downtown,” said Michael Richman, the hotel’s bankruptcy lawyer of Madison-based Richman and Richman, at a court hearing.
The motion comes after the hotel’s owner Wisconsin & Milwaukee Hotel LLC, an affiliate of Milwaukee-based Jackson Street Holdings, filed for bankruptcy protection “in order to restructure debt obligations that accumulated in recent years, particularly in an effort to cope with the challenges of the COVID-19 pandemic.”
Court documents show that the hotel owes at least $45.7 million to creditors, of which the largest claims are $42.5 million to the Wisconsin Housing and Economic Development Authority (WHEDA).
In 2012, WHEDA, a state-created agency that primarily helps finance housing, approved more than $40 million in bonds for the $50 million hotel project. However, there is no public money at stake, lawyers said, as WHEDA acted as a conduit in the deal.
The tax exempt bonds were issued under another federal program called the Midwestern Disaster Bond Relief Program that was created by the federal government in 2008 in response to tornadoes and floods throughout the Midwest. After issuing the bonds, WHEDA assigned their interest to Computershare Trust, according to Richmond.
“All of the funding came from Chinese citizens who provided the funds through the federal government’s EB-5 program in order to obtain visas and citizenship status,” Richmond said.
Of the $45.7 million owed to creditors, Wisconsin & Milwaukee Hotel Funding LLC claims $2 million. The entity is an affiliate of Milwaukee-based FirstPathway Partners, a private equity firm that makes investments on behalf of people through the EB-5 program.
The hotel owner also owes nearly $550,000 to the city of Milwaukee.
Other debts listed include a $383,000 Paycheck Protection Program (PPP) loan from Town Bank, a federal funding program implemented in response to the economic impact of the pandemic.
The hotel also owes nearly $130,000 to Marriott International and has debt with at least 12 businesses that provide materials and services from dry cleaning to food items.
“The hotel is doing very well operationally,” said Ed Carow, a managing member for the hotel company and Jackson Street Holdings, in a press release announcing the bankruptcy. “Prospects for continued improvement in operations are strong. However, existing loans have matured and need to be restructured or refinanced in order to assure the business’s future financial health.”
In court, Richman said the hotel is fully booked from now until the “end of the first four months of the case.”
