Citing the impact of COVID-19, The Iron Horse Hotel
in Milwaukee's Walker's Point is seeking Chapter 11 bankruptcy protection while it restructures debt and attempts to recover from the pandemic's financial devastation.
Iron Horse owner Tim Dixon
filed a voluntary petition Thursday in a U.S. Bankruptcy Court in the District of Delaware under the entity name Rider Hotel LLC. The filing indicates the business has estimated liabilities ranging from $10 million to $50 million; debts include a $2 million EIDL pandemic relief loan from the U.S. Small Business Administration as an unsecured creditor. The hotel, its restaurants and events operation remain open for business.
Dixon opened the 102-room boutique hotel in 2008 after redeveloping a six-story, nearly 96,000-square-foot former warehouse building at 500 W. Florida St. Today, the Iron Horse is one of the few independent, locally owned hotels in Milwaukee, meaning it's not owned or operated by a larger chain or flag.
Among the objectives in reorganizing is to maintain the business' local ownership, said Kurt Carlson
, a Chicago-based corporate law attorney and lead counsel for the Iron Horse bankruptcy case.
"(Tim) is committed to assuring that this hotel continues to grow and prosper for years to come. ... He's committed to owning the hotel, to maintaining its independence," said Carlson in an interview with BizTimes Milwaukee.
The service and hospitality industry was among the hardest hit by the pandemic and subsequent government mandates, and small or independently owned businesses were uniquely challenged without the same level of cash reserves and resources as larger companies or chains.
Filing for bankruptcy provides some "breathing room" for the Iron Horse, said Carlson to focus on returning revenues to pre-pandemic levels, without added pressure from lenders.
"We're trying to position ourself stronger in the market and really restructure our debt so we pull out of this post-COVID era stronger and better for it, and have more agreeable terms with our secured creditor," he said.
At least eight months of unfruitful negotiations with one of its secured creditors ultimately prompted the Iron Horse to file for bankruptcy. Unable to make its loan payments during the pandemic, the business proposed several workarounds and alternative solutions to fulfill its obligation to repay the lender in full within the maturity of the loan, said Carlson. But none of the proposed resolutions appealed to the secured creditor, which Carlson requested not be named in this story.
"This lender just wasn't situated and set up to deal with that. They were kind of going with the old answers and old methods and old thought processes and applying it to a post-COVID era," he said. "The secured creditor did not accept any of our proposals ... so ultimately, we were forced to file for Chapter 11 bankruptcy."
The bankruptcy case will proceed with "first-day motions," which ensure the hotel will be able to use its cash and bank accounts, retain professionals and do what it needs to do to successfully reorganize. Those hearings and motions are expected to take place within the next week or two, said Carlson.