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Airline stiffs hotels here to tune of $1M
Guests worked for Northwest, now bankrupt
By Thomas Stauffer
ARIZONA DAILY STAR
Tucson, Arizona | Published: 02.03.2006
The airline troubles that seemed such a boon to Tucson hoteliers last summer are turning out to be more of a boondoggle.
At least three Tucson hotels filled their rooms during the dog days of June, July and August with 500 mechanics training to replace Northwest Airlines mechanics, who were threatening to strike.
The Northwest mechanics did just that in August, but in September, the airline filed for bankruptcy, leaving the Tucson hotels with more than $1 million in unpaid bills.
John Cousins saw the red flags waving around Northwest and did all he could to protect himself and the hotel from the company's financial uncertainty. Despite his vigilance, Northwest gave Cousins a $123,000 cold shoulder he'll never forget.
"I've been dumped by girlfriends and taken a lot of other hits, but this one really, really hurt," said Cousins, general manager of the Smuggler's Inn, 6350 E. Speedway. "I lost a lot of sleep over this."
Smuggler's Inn, at least two other Tucson hotels and other local companies now find themselves in a long line of unsecured creditors who will probably wait years to get pennies back on the dollars owed them by the Minnesota-based carrier, which filed for Chapter 11 bankruptcy protection Sept. 14.
The trainees primarily occupied rooms at three hotels owned by Tucson-based HSL Properties: Smuggler's Inn; the former Radisson Hotel City Center, 181 W. Broadway; and the former Clarion Santa Rita Hotel & Suites, 88 E. Broadway.
The Radisson — now known as the Hotel Arizona — hosted about 290 trainees. The Santa Rita, which is now closed for renovation by a new owner, took in about 180 trainees, and Cousins made 85 rooms available at the Smuggler's Inn.
In Cousins' case, Northwest's bankruptcy hurt more because he took precautions, he said.
"I'm from Minneapolis, so I was well aware of the company and its dire financial straits," Cousins said. "I stayed on top of this and I was the only hotel to get paid, and the payments were made and the checks cleared."
Payments taken back
Cousins said he received checks for $46,000 and $77,000 that came about a week apart around the end of last summer. He took both to his bank the day he received them, and even tried to cash them on the spot.
"The bank said, 'Come on, John, we can't do that,' but they both cleared the next day and the money was in the bank," Cousins said.
About two weeks later, the money was gone.
"The bank called me and told me to expect a big negative chunk because Northwest had declared bankruptcy and gone back and reversed the payments," Cousins said.
Secured creditors — those that provided goods and services essential to the operation of the company — collect all they can before unsecured creditors, like the hotels, see a penny, said Peter Chapman, president of Philadelphia-based Bankruptcy Creditors' Service Inc.
"Basically all we can do is get a bankruptcy attorney and get in line," Cousins said.
Other businesses lose
Hotels, caterers and other businesses that provided services to Northwest are also out all the extra money they paid for supplies and staffing that they would not normally have had during the summer months, said Roger Golden, general manager of the Hotel Arizona.
"Not only did our property have higher costs than we would have had, but at the time, we were affiliated with Radisson, so we had to pay franchise fees based on revenue that we never got," Golden said. "And their business (Northwest) displaced other business."
On May 24, the then-manager of the hotel canceled the reservations of the American Institute of Aeronautics & Astronautics, which held its annual conference at the Tucson Convention Center in July, in order to accommodate the Northwest trainees.
Officials from HSL Properties did not return phone calls seeking comment. Humberto S. Lopez is the company's president and CEO.
Cousins said he estimates the unpaid bills amounted to about $800,000 for the Radisson, about $100,000 for the Santa Rita, and $123,000 for the Smuggler's Inn.
The president of the company that manages the Hotel Arizona for HSL Properties also declined to specify the amount owed.
"I think it's fair to say that of all the local unsecured creditors, Hotel Arizona would be by far the largest," said Tom Tracy, president of The Lodging Co.
While the taking of payments that already cleared sounds unjust, it's a reality of bankruptcy known as the 90-day rule that's designed to protect creditors from favoritism, said local bankruptcy attorney Clifford Altfeld.
Law prevents favoritism
"In order to prevent debtors from paying off their favorites immediately before the bankruptcy, any old bill paid within 90 days of the bankruptcy has to be paid back into the bankrupt estate," Altfeld said.
"The public policy behind the statute is to stop the debtor from paying his friends immediately before the bankruptcy, so you and I as creditors worry less about shenanigans," he said.
"It's a brutal law, and any creditor who gets paid within 90 days and then has it taken away always feels outraged and with justification, but it's the law."
The reality for HSL Properties and every other creditor is that they will probably wait at least two years to get any of the money owed them, Chapman said.
"All you have to do is look at United (Airlines) and see that it took four years for them to get out of bankruptcy," he said. "And the unsecured creditors are going to get pennies on the dollar — not quarters, pennies."
● Contact reporter Thomas Stauffer at 573-4197 or [email protected].
Guests worked for Northwest, now bankrupt
By Thomas Stauffer
ARIZONA DAILY STAR
Tucson, Arizona | Published: 02.03.2006
The airline troubles that seemed such a boon to Tucson hoteliers last summer are turning out to be more of a boondoggle.
At least three Tucson hotels filled their rooms during the dog days of June, July and August with 500 mechanics training to replace Northwest Airlines mechanics, who were threatening to strike.
The Northwest mechanics did just that in August, but in September, the airline filed for bankruptcy, leaving the Tucson hotels with more than $1 million in unpaid bills.
John Cousins saw the red flags waving around Northwest and did all he could to protect himself and the hotel from the company's financial uncertainty. Despite his vigilance, Northwest gave Cousins a $123,000 cold shoulder he'll never forget.
"I've been dumped by girlfriends and taken a lot of other hits, but this one really, really hurt," said Cousins, general manager of the Smuggler's Inn, 6350 E. Speedway. "I lost a lot of sleep over this."
Smuggler's Inn, at least two other Tucson hotels and other local companies now find themselves in a long line of unsecured creditors who will probably wait years to get pennies back on the dollars owed them by the Minnesota-based carrier, which filed for Chapter 11 bankruptcy protection Sept. 14.
The trainees primarily occupied rooms at three hotels owned by Tucson-based HSL Properties: Smuggler's Inn; the former Radisson Hotel City Center, 181 W. Broadway; and the former Clarion Santa Rita Hotel & Suites, 88 E. Broadway.
The Radisson — now known as the Hotel Arizona — hosted about 290 trainees. The Santa Rita, which is now closed for renovation by a new owner, took in about 180 trainees, and Cousins made 85 rooms available at the Smuggler's Inn.
In Cousins' case, Northwest's bankruptcy hurt more because he took precautions, he said.
"I'm from Minneapolis, so I was well aware of the company and its dire financial straits," Cousins said. "I stayed on top of this and I was the only hotel to get paid, and the payments were made and the checks cleared."
Payments taken back
Cousins said he received checks for $46,000 and $77,000 that came about a week apart around the end of last summer. He took both to his bank the day he received them, and even tried to cash them on the spot.
"The bank said, 'Come on, John, we can't do that,' but they both cleared the next day and the money was in the bank," Cousins said.
About two weeks later, the money was gone.
"The bank called me and told me to expect a big negative chunk because Northwest had declared bankruptcy and gone back and reversed the payments," Cousins said.
Secured creditors — those that provided goods and services essential to the operation of the company — collect all they can before unsecured creditors, like the hotels, see a penny, said Peter Chapman, president of Philadelphia-based Bankruptcy Creditors' Service Inc.
"Basically all we can do is get a bankruptcy attorney and get in line," Cousins said.
Other businesses lose
Hotels, caterers and other businesses that provided services to Northwest are also out all the extra money they paid for supplies and staffing that they would not normally have had during the summer months, said Roger Golden, general manager of the Hotel Arizona.
"Not only did our property have higher costs than we would have had, but at the time, we were affiliated with Radisson, so we had to pay franchise fees based on revenue that we never got," Golden said. "And their business (Northwest) displaced other business."
On May 24, the then-manager of the hotel canceled the reservations of the American Institute of Aeronautics & Astronautics, which held its annual conference at the Tucson Convention Center in July, in order to accommodate the Northwest trainees.
Officials from HSL Properties did not return phone calls seeking comment. Humberto S. Lopez is the company's president and CEO.
Cousins said he estimates the unpaid bills amounted to about $800,000 for the Radisson, about $100,000 for the Santa Rita, and $123,000 for the Smuggler's Inn.
The president of the company that manages the Hotel Arizona for HSL Properties also declined to specify the amount owed.
"I think it's fair to say that of all the local unsecured creditors, Hotel Arizona would be by far the largest," said Tom Tracy, president of The Lodging Co.
While the taking of payments that already cleared sounds unjust, it's a reality of bankruptcy known as the 90-day rule that's designed to protect creditors from favoritism, said local bankruptcy attorney Clifford Altfeld.
Law prevents favoritism
"In order to prevent debtors from paying off their favorites immediately before the bankruptcy, any old bill paid within 90 days of the bankruptcy has to be paid back into the bankrupt estate," Altfeld said.
"The public policy behind the statute is to stop the debtor from paying his friends immediately before the bankruptcy, so you and I as creditors worry less about shenanigans," he said.
"It's a brutal law, and any creditor who gets paid within 90 days and then has it taken away always feels outraged and with justification, but it's the law."
The reality for HSL Properties and every other creditor is that they will probably wait at least two years to get any of the money owed them, Chapman said.
"All you have to do is look at United (Airlines) and see that it took four years for them to get out of bankruptcy," he said. "And the unsecured creditors are going to get pennies on the dollar — not quarters, pennies."
● Contact reporter Thomas Stauffer at 573-4197 or [email protected].
