CHARLESTON, W.Va. — The parties in a bankruptcy case over a Morgantown hotel shouldn’t need many refreshers.
The hotel and its owners just went through bankruptcy a few years ago before emerging with the loan deal that’s currently considered in default.
Mountain Blue Hotel Group and its ownership team led by developer William Abruzzino filed for Chapter 11 reorganization protection on Sept. 13 in U.S. Bankruptcy Court in the Northern District of Georgia.
Many of the same cast of characters — and the very same Hilton Garden Inn in Morgantown — filed for bankruptcy protection in 2012 under the company name Emerald Coast Realty.
The bankruptcy proceedings in that case were cut short when the ownership group led by Abruzzino managed to secure a $15 million loan.
That’s the very same loan that resulted in a breach of contract lawsuit being filed in August by the lender and then bankruptcy a little more than a week ago.
“I’m glad I’m not the person who approved the loan,” said Monongalia County Commissioner Tom Bloom when told about the earlier bankruptcy and how the hotel company emerged.
There’s not much to particularly prohibit repeat Chapter 11 filings, which are, with some dark humor, called Chapter 22 cases.
There are so many similarities in the 2012 and 2017 hotel cases, it’s almost as if only the judge in U.S. Bankruptcy Court in Atlanta has changed. In the first case, U.S. Judge James Massey was assigned to the case. Now federal Judge Lisa Ritchey Craig receives the honor.
Emerald Coast filed for Chapter 11 on Nov. 8, 2012. The managing member who signed the filing was William Abruzzino, who is currently involved in bankruptcy proceedings or default lawsuits over hotels in Morgantown, Clarksburg and Elkins, plus over his Crossings Mall property in Elkview.
Emerald Coast’s designated office address, along with several other Abruzzino properties, is listed with the West Virginia Secretary of State’s office at 205 Marion Square.
The company’s real property listed in Emerald Coast’s statement of financial affairs included the Hilton Garden Inn in Morgantown, valued then at $22 million
It also included property associated with the Summersville Inn & Suites, with a listed value of $6 million, and the Elkview Inn & Suites at Crossings Mall, listed at $5.8 million, plus $5.1 million in land, property and restaurants in Kanawha City.
The Summersville and Elkview hotels had been transferred to Abruzzino’s Emerald Grande Hospitality in 2008, but Emerald Coast continued to own the furniture and equipment necessary to run the hotels, which represented the property in the bankruptcy filing.
The Elkview Inn & Suites later became a LaQuinta and had bankruptcy filed this past January through owner Emerald Grande, another Abruzzino company headquartered at 205 Marion Square.
Two more Emerald Coast properties had been transferred to Abruzzino’s Mountain West LLC prior to the bankruptcy. Those were the Hilton Garden Inn in Clarksburg and the Hampton Inn in Elkins, both now in a case of default over a $19,630,000 loan
Partners listed in Emerald Coast’s statement of financial affairs include Abruzzino and his wife Rebecca along with other family members such as Robert and Mark Abruzzino, plus a few others with interests ranging from 2 to 10 percent.
All are the same investors listed in the current federal court actions over the Hiltons in Morgantown and Clarksburg and the Hampton Inn in Elkins.
Among those others, with a 12 percent interest, was a limited liability corporation called AA Properties.
AA then — as now — was a 50-50 partnership between Senator Joe Manchin and his longtime adviser, Larry Puccio.
With the current lawsuits, Manchin and Puccio have acknowledged being partnered in AA but have said the limited liability corporation is not involved with the hotels. A private attorney for Manchin said the listing as an investor in the Hilton was a mistake that would be cleared up in court, though that hasn’t happened yet.
“AA Property has no affiliation, no stock, no ownership with the hotels,” Puccio said a few weeks ago when first asked about the hotel investment.
At that time, Puccio said he originally thought AA had dissolved.
“I thought AA had been dissolved. AA had not been dissolved,” said Puccio, a former state Democratic Party chairman and prominent lobbyist who later said he was finished talking about the hotel deal.
Manchin’s Senate financial disclosures say he had $50,001 to $100,000 invested in AA in 2016, with earnings of $11,200.18.
Disclosures from prior years show the AA partnership earned Manchin $11,000 in 2015, $11,454.52 for 2014, $15,000 for 2013 and $12,966 in 2012.
There’s no particular way of telling where besides the hotels AA has been invested.
In the 2012 bankruptcy filing for Emerald Coast, AA was mentioned in several ways.
AA was listed as a creditor in the statement of financial affairs, paid $40,000 and still owed $60,000 at the time of the filing. AA was listed in a separate schedule as a creditor holding an unsecured claim of $45,000.
Puccio was also involved in other ways. He, personally was listed as a creditor and paid $1,111. Larry Puccio LLC was also listed as a creditor and paid $405. And A & P LLC, a longtime partnership between Puccio and Abruzzino that was dissolved this past spring, was listed with $16,200 paid.
The certificate of service listed AA with Puccio’s personal email address along with a Fairmont mailing address.
Over the months that the Emerald Coast case wound through the bankruptcy system, creditors were notified and attended meetings, motions were filed and status was reported on.
Some of the same problems the Morgantown hotel is experiencing today held true then, too. In a November, 2012, motion to approve emergency use of cash collateral, lawyers for Emerald Coast put forth the case that a busy West Virginia University football weekend was approaching and the hotel needed to be primed.
“Debtor notes that, with respect to the Morgantown location, November 16-18, 2012, this upcoming weekend, is the so-called Oklahoma vs. West Virginia football weekend,” the lawyers wrote. “The Hilton is fully booked and may need some additional amount for petty cash and for immediate brake repairs on the hotel’s shuttle bus.”
As the hotel bankruptcy case wound into 2013, a major shift happened. Abruzzino and his fellow investors were reaching a deal to re-finance through a new lender. The new $15 million loan with UBS Investment Bank would cover all major claims.
On April 2, 2013, lawyers for Emerald Coast filed a motion to dismiss the bankruptcy.
Refinancing, the lawyers said, would resolve matters with the largest creditor, the American National Insurance Company, which was owed $11 million. Additional claims of $4 million also would be resolved.
And, the lawyers wrote, “Numerous creditors have accepted a discounted payment on their claims of about 19.3 percent.”
The lawyers continued, “In light of the current posture of this case, it appears evident that there is no reasonable need for a bankruptcy reorganization of this debtor. The best interest of creditors and this estate will be served by an exit from bankruptcy through the UBS refinance vehicle.”
As an exhibit, the lawyers attached a letter from UBS Investment Bank addressed to Abruzzino. “Dear Mr. Abruzzino,” it began, “UBS Real Estate Securities Inc.” is pleased to submit this mortgage loan application.” On the final page, as it was submitted, Abruzzino had already scrawled his signature.
It wasn’t over yet.
On June 25, 2013, American National Insurance Company, the biggest creditor, filed its objection. The company, known as ANICO, had loaned an original principal amount of $10.8 million to Emerald Coast in 2008.
ANICO said Emerald Coast had been in default because it hadn’t been paying down its debt. In October, 2012, ANICO accelerated its note and initiated foreclosure proceedings, just as the current lender has done.
The objection noted that then, as now, Emerald Coast had fallen behind on its local taxes — owing $157,874.97 at the time to the Monongalia County Sheriff’s Tax Office, secured by ANICO’s collateral
“Debtor filed this bankruptcy case in order to stop ANICO’s foreclosure proceedings,” the company wrote in its objection. In the current case, Mountain Blue filed bankruptcy after the lender threatened to auction the hotel.
ANICO expressed concern that, at the time of its objection, the new loan wasn’t nailed down:
“ANICO is concerned that in the event the motion is granted and the proposed refinancing with USB never materializes, debtor will simply initiate another bankruptcy proceeding in order to frustrate ANICO and its other creditors’ collection efforts, and cause additional and significant expense and delay.”
Well, that prediction is not exactly what happened.
Instead of remaining ANICO’s problem, the new loan became someone else’s problem.
On August 22, 2013, after more negotiations, the court entered an order on the motion to dismiss. ANICO had withdrawn its objection to dismissal. Judge Massey wrote that it appeared Emerald Coast had or would soon have the ability to refinance its obligations.
The judge wrote that the order to dismiss bankruptcy would be finalized once Emerald Coast could prove the new loan and gone through and the bulk of the debts paid off. And that’s what happened.
On Sept. 17, 2013, Abruzzino’s Mountain Blue LLC reached its $15,470,000 loan agreement with UBS Real Estate Securities.
The same day, Emerald Coast submitted an affidavit to federal court saying the loan had gone through and that ANICO had been paid.
And that set in motion the events that led to another bankruptcy, almost exactly four years later.
Bloom, one of the Monongalia County officials trying to recover the current $150,000 in unpaid taxes from the Morgantown Hilton, remains puzzled about what happened — much less how it happened twice.
“Where the property is located and the chain’s name you would have though it was a good investment,” Bloom said Sunday afternoon. “The location and the name, and we just don’t understand why it went bankrupt. I think the public doesn’t either.”