RadLax’s Time to Shine

A bankruptcy case that’s flown under the radar for nearly two years may finally be getting its moment in the spotlight, thanks to a recent appellate-court ruling that upholds the practice of lenders using debt as currency in their bids to take back assets.

RadLax Gateway Hotel LLC—which owns a struggling Radisson by the Los Angeles International Airport—is like the forgotten younger sibling of hotel bankruptcy cases, always giving up the spotlight to River Road Hotel Partners LLC.

Actually, forget siblings; the cases are more like twins, according to attorney David Neff.

They were filed in the same bankruptcy court on the same day, and they involve the same law firm and the same lenders pushing against them.

And while we personally think RadLax has the cooler nickname, it’s also been the case that’s quietly faded into the background, even as Chicago airport-hotel owner River Road’s fight with its lenders over the hot-button topic of credit bidding has made headlines.

“No one ever seems to notice RadLax and it’s the same exact case as River Road,” Neff said in an interview Wednesday.

But that could all change soon. River Road’s case seems to be drawing to a close, as the lenders edge closer to winning confirmation of their plan. The lenders’ plan doesn’t incorporate a bankruptcy-auction process at all, thus eliminating the credit-bidding issue.

As a result, the plan’s confirmation would mean that the big decision handed down Tuesday by the Seventh U.S. Circuit Court of Appeals—affirming the bankruptcy court’s ruling that River Road didn’t have the right to bar lenders from bidding debt for the company’s assets—won’t really reverberate at all in the case.

“That confirmation would moot out any effect,” Stephen Bobo, an attorney representing unsecured creditors in River Road’s case, said in an interview Tuesday.

Enter RadLax. Though it sports the same lending group—led by Amalgamated Bank—as River Road, RadLax was witness to a different strategy. Where the lenders opted to file their own plan in River Road, they instead lay low in RadLax, seeking only to have the stay lifted in the case so they could foreclose on their assets.

With no plan pending confirmation, RadLax could be the setting in which the repercussions of the new decision play out.

“Even if they confirm a plan in River Road, RadLax is still out there,” Neff said.

He’s edging toward taking the credit bidding issue to the Supreme Court.

“Right now, I would say the odds are that we would file such a petition [with the Supreme Court] but we’ll just have to see,” he said.

The matter could be ripe for the high court because lower courts have split on the issue. Last year, for example, the Third U.S. Circuit Court of Appeals sided with the publisher of the Philadelphia Inquirer and the Philadelphia Daily News, allowing it to block lenders from using their debt to bid at an auction for the newspapers’ assets. The bankruptcy judge assigned to the case had given the green light for credit bidding, while a district court judge had reversed the bankruptcy judge’s decision.

While the courts are divided, one thing’s for sure: River Road’s case isn’t the end of the line for this issue.

“The chance of it going to the Supreme Court still exists even though the River Road plan may be confirmed,” Neff said.

It may just be all about RadLax from now on.