Lombard Westin filing bankruptcy to restructure $246.6 million debt
The agency that owns the Westin hotel in Lombard is restructuring its debt through a Chapter 11 bankruptcy filing that will help it pay off $246.6 million owed to bond holders while continuing operations.
The bankruptcy filing comes with a $3 million commitment from the village of Lombard to pay back the portion of hotel bonds used to make water main improvements around the hotel site at 70 Yorktown Center before the 500-room facility opened in August 2007.
Village officials say making the payment will help stave off future downgrades to the village's credit rating, which already has suffered several hits in the six years since Westin ownership began asking for financial help.
"This is a key for us to start working on our bond rating," Village Manager Scott Niehaus said Monday.
The 18-story hotel is owned by the Lombard Public Facilities Corp., created in 2003 and run by President Paul Powers, an insurance broker with a financial background in commodity and interest rate futures. Hotel revenues never matched projections set during a 2005 market study, which village officials blame largely on the recession in 2008 and 2009.
So every six months since December 2011, the corporation has submitted a request to the village seeking help making payments on $183.7 million in loans taken out in 2005 and 2006. Each time, Niehaus said, the village board denied the request and voted not to put taxpayer dollars toward the hotel's liabilities.
Before receiving any of a dozen twice-yearly requests to bail out the hotel's bond payments, Lombard's credit rating stood at AAA, Niehaus said. Now, it's at B.
The village's $3 million payment will come from the water fund and will not result in any service cuts, water rate increases, tax increases, employee layoffs or delays in capital projects, Niehaus said. The public facilities corporation will use the money from the village to pay for future improvements to guest rooms and public areas at the hotel -- not to pay off debt. The village board unanimously approved the payment during a special meeting July 25.
"This has been a long time coming," Village President Keith Giagnorio said after trustees approved the payment. "From tonight on, we move forward, and that's the best we can do."
With the commitment from the village in hand, the bankruptcy proceedings are scheduled to continue with a hearing Thursday in Chicago. Hotel officials say operations, including events and banquets, will continue unaffected by the financial proceedings.
Events are especially important to the hotel, since they brought in 60 percent of the facility's $14.5 million in revenue in 2016, according to bankruptcy documents.
Niehaus said it makes sense for the village to repay the amount of hotel bonds it used to make water main improvements because the infrastructure project helped the Yorktown area thrive. Since 2007, other nearby developments include The Shops on Butterfield, a Chase bank, a McDonald's, a Dunkin' Donuts, a Sam's Club, an apartment complex, AMC movie theater renovations and a $20 million mall renovation. Two new projects also are underway north of the mall.
"The village's interest is in making sure that the hotel and conference center has an opportunity to thrive and remain viable," Niehaus said, "especially in a day and age when traditional retail, bricks and mortar shopping centers are under siege."
To help redevelop the area to the east of the hotel, which houses Northern Baptist Theological Seminary, the village plans to create a tax increment financing district. If the 28-acre site is designated as a TIF district, property taxes paid to local governments would be frozen for up to 23 years. Any extra property tax money collected within the area after the district is established would go into a special fund to help pay for certain improvements.
Niehaus said the village would be obligated to put $1.5 million, and could put up to $3.7 million, in TIF revenue toward site improvements at the Westin if the TIF district is created. The village board is scheduled to host a public hearing about the potential taxing district on Sept. 21 and could approve the district Oct. 19.