The Columbia Hilton Inn, a luxury hotel in Howard County that has seesawed in and out of financial trouble for months, is on another downward swing that may send it into bankruptcy, hotel officials said this week.
The Union Mutual Life Insurance Co. of Portland, Maine, filed a foreclosure suit two weeks ago in Howard County Circuit Court, charging that the inn's owner, Twin Knolls Associates, had defaulted on a $5.5 million loan.
The suit is the second initiated by the insurance company in the past eight months. The property was saved from the auction block last May by an 11th-hour deal that was supposed to raise $2.2 million.
The deal fell through shortly afterward, however, precipitating the latest financial crisis, which came to a head this month when the insurance company filed suit.
According to court papers, the 152-room inn, located at the intersection of Rtes. 175 and 29 in Columbia, is facing another auction on Feb. 11. But Anthony Souza, one of the inn's two managing partners, said he will fight the sale, even if it means filing for bankruptcy.
"We're intent on hanging on to the hotel. We don't want to file for Chapter 11 bankruptcy , but if we have to we will," he said.
Under Chapter 11 of the federal bankruptcy code, the Twin Knolls group would be protected from creditors until it devises a plan to restructure its debts.
Souza said he is negotiating with an investor who is interested in becoming the hotel's third managing partner. If an agreement is reached, it would resolve the inn's financial problems, he said.
The hotel opened in 1982, after 31 limited partners who were brought into the project by Daneske & Co., an investment syndicator, agreed to provide $2.2 million in working captial. Despite the influx of cash, the inn has been undercapitalized and overburdened by debt, Souza said.
Under the financial arrangement being negotiated, the investor, who Souza refused to name, would become a general partner and buy out the limited partners as well, ending a stormy relationship with Daneske & Co. that Souza said contributed to the inn's financial woes.
In all, the insurance company claims that the partnership owes $7.6 million in outstanding principal, interest, and special charges -- $1.2 million more than the company claimed against the hotel in its foreclosure suit last May.
Steven Fox, manager of sales and marketing with Michael Fox Auctioneers, said the hotel, which includes a 100-seat cocktail lounge, a 120-seat restaurant and a banquet hall, has been appraised at $10 million. He said the property could bring $8 million or more at auction.
The limited partners were notified about the possible sale this week, said Leonard Rush, a New York City investor. "It could be very, very good or very very bad. It's one of those things you never know about until you cash in," he said.