Hawaii Hotelier Closes on Debtor-In-Possession Loan

Canyon Capital Realty Advisors of Beverly Hills is providing the bulk of the financing. Ramsfield Hospitality Finance of Manhattan funded an $8.1-million B note in the loan. The parties involved aren't saying, but other industry sources tell GlobeSt.com these types of loans typically carry interest rates north of 10%. Canyon Capital managing partner Bobby Turner tells GlobeSt.com the transaction took several months to complete due to the number of parties involved in the bankruptcy proceedings.

Tatibouet has been involved in the Hawaii hospitality industry for decades. His parents were among the pioneers of the hotel industry in Waikiki, opening the 14-room Royal Grove Hotel in 1948. The family founded Hotel Corp. of the Pacific in 1968 and, in 1986, began doing business as Aston Hotels & Resorts. Tatibouet sold the business to ResortQuest in 1998 for nearly $30 million plus 1.7 million shares of ResortQuest stock.

In mid-2000, ResortQuest sued Tatibouet, claiming breach of fiduciary responsibility as a director, citing his sale of the Aston name and the related Web domain to competitor Cendant Corp. Tatibouet countered that his agreements with ResortQuest made clear the Aston name belonged to him, except for limited ResortQuest use inside Hawaii, according to published reports. The website was transferred back to ResortQuest, but Tatibouet continued to exercise his right to the name outside Hawaii. A panel of arbitrators in spring 2002 ruled that Tatibouet had violated his responsibility to ResortQuest but was not seeking personal gain at ResortQuest's expense. The panel denied both the $17-million claim Tatibouet brought against ResortQuest and the $4.7 -million claim ResortQuest brought against Tatibouet, according to published reports.

Three years later, in April 2005, Tatibouet filed for Chapter 11 bankruptcy reorganization, listing between $10 million and $50 million in debts and assets. Creditors holding the largest unsecured claims among the 58 creditors listed in the filing included Sterling Savings Bank for $10 million, Chesterfield Mortgage Investor for $3.8 million and Cendant Corp. for $3.5 million. Tatibouet tells GlobeSt.com the filing was a defensive maneuver made to halt Central Pacific Bank's attempts to foreclose on the Coral Reef Hotel, whose performance declined dramatically in the aftermath of Sept. 11, 2001, causing a cash crunch that put him in default.

Proceeds from the debtor-in-possession loan from Canyon Capital repaid all of the hotel's secured creditors and will provide $7 million to renovate the hotel. Tatibouet tells GlobeSt.com he also is making plans to pay off all unsecured creditors. "My family been here since 1908; sometimes we've been slow but we've always paid everybody up," he says. "I want to keep that record in tact."

Tatibouet plans to kick-off renovation of the Coral Reef Hotel in mid-April. The renovation includes upgrading the hotel's public spaces, all of the guest rooms and may include the construction of a fitness center, business center/conference facility and small spa on the second floor of the hotel.

Instead of Aston Hotels, Tatibouet has tapped Aqua Hotels and Resorts, a company founded by Hawaii hotelier Mike Paulin, to manage the property. The hotel will be re-flagged as an Aqua Hotel and be affiliated with Preferred Hotel's Sterling Hotel Group. Interiors International, run by Honolulu designer Terry Burke, will design the layouts and select case goods for the renovation of the hotel.