Adobe Inventory
A municipal bond-financed lodge challenge within the Chicago suburbs is again out there with a deal to restructure debt issued to exit a chapter restructuring seven years in the past.
The Westin Chicago Lombard lodge and conference heart has had a bumpy street because the first debt issuance for the challenge in 2005.
The lodge’s struggles dragged the score of the village of Lombard to sub-investment grade for a few years.
The nonprofit company the village created to problem the debt and personal the challenge is returning to market with unrated bonds designed to remedy cost defaults on its Collection 2018A bonds.
The $88.1 million of tax-exempt first tier Collection 2025 income bonds, issued by means of Wisconsin’s Public Finance Authority for borrower the Lombard Public Amenities Corp., will value the week of Sept. 29, in response to an internet investor presentation.
“The truth that the Lombard Public Amenities Corp. continues to be struggling to fulfill debt obligations years after its chapter is a pink flag,” Ravi Mishra, coverage analyst at Illinois Coverage, a Chicago-based, libertarian-leaning assume tank, mentioned by e mail.
Lombard, a village of about 44,000 20 miles west of Chicago,
BofA Securities is senior managing underwriter for the brand new bonds. GPM Municipal Advisors, LLC is the municipal advisor on the deal. Taft Stettinius & Hollister, LLP is bond counsel, and Greenberg Traurig, LLP is particular tax counsel, in response to the preliminary restricted providing memorandum.
The Collection 2025 bonds will refinance and restructure the primary tier Collection 2018A-1 income bonds, of which there’s $32.9 million of mixture principal at present excellent, and the primary tier Collection 2018A-2 income bonds, of which there’s $26.59 million of mixture principal at present excellent.
They can even pay a portion of unpaid accrued curiosity on the primary tier Collection 2018A bonds, together with paid-in-kind curiosity; make a deposit to the lodge capital expenditure reserve fund; fund a debt service reserve fund for the primary tier Collection 2025 bonds; and pay prices of issuance.
The five hundred-room, 18-story lodge, owned by the company, opened in August 2007. The challenge additionally features a 55,500-square-foot conference heart, restaurant and banquet area, a four-story parking storage and a parking zone.
The brand new
From the start, revenues from operations weren’t sufficient to pay debt service and fund reserve account deposits.
The village misplaced its investment-grade score in 2014 when Lombard
S&P subsequently withdrew its B score in 2019, mentioned David H. Smith, affiliate director at S&P. The village didn’t return to funding grade
“The BBB score displays our view of town’s credit score high quality in addition to our view of an historic unwillingness to help debt service obligations,” Smith mentioned by e mail.
The company declared Chapter 11 chapter in July 2017.
In March 2018, the chapter court docket signed off on the company’s Chapter 11 reorganization plan.
In 2019, the lodge operator started a complete renovation of the visitor rooms and assembly areas. The renovation got here with a $14.7 million price ticket.
The company defaulted on its Collection 2018 income bonds in mid-2020 and once more in 2021, blaming shelter-in-place orders and restrictions on gatherings and indoor eating put in place throughout the COVID-19 pandemic.
It then secured a
In April 2021, Crescent Resort Administration Companies grew to become operator of the lodge and signed a franchise settlement with Marriott Worldwide.
In 2022, the company
In January 2024, the company resumed partial curiosity funds on the Collection 2018A-1 bonds and the Collection 2018A-2 bonds, in response to the investor presentation.
However the company was saddled with paid-in-kind or PIK curiosity after its scheduled curiosity funds fell under the required curiosity, leading to a rising excellent principal stability on the primary tier Collection 2018A bonds. (The PIK curiosity provisions resulted in July 2021.)
The franchise settlement with Marriott additionally requires vital ongoing capital bills for repairs, replacements and renovations, in response to the restricted providing doc.
Among the proceeds of the primary tier Collection 2025 bonds can pay for patio remediation, a substitute roof and cooling tower “and different brand-refresh wants,” in response to the investor presentation.
Illinois Coverage’s Mishra mentioned the tax increment financing district across the lodge and conference heart is “subsidizing failure,” not financial growth, and tasks like this could succeed or fail primarily based on market demand, not an area authorities’s capability to problem debt.
“The hazard of TIF districts is that they divert tax {dollars} away from faculties and core companies that want them, and guess on tasks that may underperform,” Mishra mentioned.
Lombard Finance Director Tim Sexton declined to remark, saying “the village just isn’t very concerned” within the refinancing. He referred all inquiries to the LPFC’s legal professional, Donald Renner III, who didn’t reply to requests for remark.
Sexton additionally pointed to a memo, ready by himself and Village Supervisor Scott Neihaus and introduced to the board, which notes that the village employed the identical restructuring attorneys (Saul Ewing LLP) to evaluate the documentation for this deal because it did throughout the 2018 debt restructuring.
The village believes it has not agreed to any monetary obligations below this deal apart from rebating the taxes generated by the property, the memo mentioned.
In response to the village’s most up-to-date annual complete monetary report,
Lombard has an issuer credit standing of BBB with a secure outlook by S&P, however the previous hangs over the score. “Its earlier sequence of non-appropriation occasions proceed to affect our view of its dedication to funding future debt service obligations,” the score company mentioned in 2023, when it restored its score.
About half an hour away from the Lombard challenge, the Westin Chicago North Shore in Wheeling, constructed on an identical timeline, has additionally run into monetary issue, although the native authorities just isn’t impacted.
The bonds that the village of Wheeling offered in 2005 by means of a tax increment financing settlement to finance the development of that challenge had been
The lodge reportedly
