Many New York businessmen look on bankruptcy as the end of a business, but some investors look to bankruptcy as the only path to resurrecting the business. A prime example of using bankruptcy to save a business instead of dismember it was recently provided by the TIME Nyack Hotel.
The hotel was touted as the first "luxury life style hotel" in the Hudson River Valley when it first opened in a renovated warehouse in Nyack in 2016. Now, the hotel has an appraised value of $33 million and debts of $40 million.
Disgruntled investors asked a Federal judge to declare the hotel bankrupt and to open a Chapter 11 proceeding. The investors who filed the involuntary bankruptcy petition have pointed to several causes of the hotel's problems, but the person at the center of the controversy is the hotel's general manager. One investor described him as a "con man" and accused him of stealing more than $1 million.
The investor who spoke to reporters said that his investors' group has another investor who is willing to pay off or assume the hotel's debts in return for an interest in the business. The central purpose of the bankruptcy filing was to separate the general manager from the business.
The hotel and its connected restaurant have apparently done well, and the major difficulties have arisen from the management's alleged thefts and other failings. The hotel operated without a number of necessary permits, and the investors want to remedy that situation.
No criminal charges have been filed against the deposed general manager, and he appears to be willing to contest the investors' attempts to discharge him. The investors who are attempting to rescue the business may be in for a long struggle before the outcome is clear. Nevertheless, this case shows how bankruptcy can be used as a useful tool in the salvaging of a business.