The owners of the Williamsburg Hotel in Brooklyn, N.Y., defeated attempts by a federal bankruptcy watchdog to oust hotel management, allowing its operators to move ahead with a plan to restructure its finances and emerge from chapter 11, WSJ Pro Bankruptcy reported. Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., yesterday denied a request by the U.S. Trustee to convert the chapter 11 case to a chapter 7 liquidation, which would have required installing an independent overseer to take over the property. The U.S. Trustee claimed the bankrupt company behind the hotel, 96 Wythe Acquisition LLC, required independent oversight because it didn’t disclose its connection to a corporate affiliate that manages the hotel’s operations and isn’t in chapter 11. Judge Drain disputed the government’s claim, saying he was aware of the business arrangement, which he said is common in the hospitality industry. The decision means the owners of the Williamsburg Hotel can press forward with a proposed restructuring plan, which includes their offer to provide an additional $6.56 million investment into the property. Judge Drain is scheduled to consider approving the proposed restructuring plan in December. The 147-room hotel was developed by Heritage Equity Partners and opened in 2017. The Williamsburg Hotel is one of several hotel properties that have slipped into bankruptcy since the COVID-19 pandemic, which hit the New York hotel industry particularly hard. 96 Wythe Acquisition filed for bankruptcy in February amid disputes with its primary lender, an affiliate of alternative-asset-management firm Benefit Street Partners LLC, over an alleged default on a $68 million loan.
