Hotel seeks bankruptcy protection
The Hotel Hot Springs & Spa’s mortgage holder has asked a bankruptcy court to keep the property in possession of the receiver appointed to run the business last month.
The corporate entity that Gary R. Gibbs owns the hotel under filed for Chapter 11 bankruptcy Thursday, putting the complaint for foreclosure Summit Investment Management filed in Garland County Circuit Court on hold pending the bankruptcy proceedings.
KPartners Hotel Management of San Antonio has been running the hotel since Division 3 Circuit Judge Lynn Williams appointed it as the receiver last month. The hearing Gibbs had requested to challenge the foreclosure action and appointment of the receiver was scheduled for Friday, but his company’s attorney filed a motion on Thursday notifying the court of the bankruptcy filing.
Summit Investment Management, the Denver private equity firm that acquired the hotel’s mortgage last year, filed a motion Thursday in the bankruptcy proceedings to keep the receiver in possession of the hotel pending the bankruptcy action, arguing that its security interest in the property would be jeopardized if the hotel were transferred to Gibbs or a court-appointed trustee. Summit Investment is seeking a $23,374,719 judgment against the property.
Gibbs is facing a pending motion for contempt in circuit court that alleges he violated a court order by withdrawing more than $30,000 from a hotel bank account after the receiver had taken possession of the property.
According to Gibbs’ bankruptcy petition, he has liabilities of $1 million to $10 million and $50,000 or fewer in assets. The petition lists 20 unsecured creditors he owes more than
$1.6 million, including the city of Hot Springs, $23,425 for unpaid rent on the vacant lot adjacent to the hotel; the Hot Springs Advertising and Promotion Commission, $36,160 in unpaid hospitality taxes; and the county tax collector, $105,313 in unpaid real estate taxes.
Summit investment’s motion said negative balances in the hotel’s operating accounts at the time of the receiver’s appointment show Gibbs is incapable of managing the hotel. The motion said accounts were in the red despite the hotel grossing more than $7.6 million last year, the result of Gibbs diverting hotel revenue for his personal use, the motion said.
“Gibbs took distributions of
$1,684,881 in 2017, leaving the debtor woefully undercapitalized,” the motion said. “He was the only member of the debtor to receive a distribution of any kind in that year.
“Through his direct actions and inactions, Gibbs has greatly harmed the reputation for the hotel within the local and regional business community due to all the failures above and also due to his looting of the debtor’s financial resources and the attendant lack of financial resources.”
The motion said Summit Investment has gone to considerable expense to keep the hotel operating, including purchasing new towels, linens, food, beverages and cleaning supplies and funding a bimonthly payroll of $45,000 for the hotel’s 75 employees.