Hagerstown Hotel Associates filed for Chapter 11 bankruptcy protection Nov. 26 because the 2001 recession and 9/11 terrorist attacks hurt tourism and business travel, according to Burruss and court records.
The company was able to pay its bills through August 2002 thanks to an "extensive cash infusion" by its owners, court papers state.
Hagerstown Hotel Associates' net operating loss, after debt service, was $574,996 for the fiscal year that ended Dec. 31, 2002. The unaudited, estimated operating loss for the current fiscal year is $316,842.
Burruss said bookings are up for the coming year at the 210-guest room hotel on Dual Highway and he expects the company to emerge from bankruptcy within about 90 days.
Choice Hotels International spokeswoman Olivia Kranz said the local hotel will maintain its Clarion franchise, but Choice officials in Silver Spring, Md., are monitoring the situation.
Magna Hospitality Group employs the approximately 120 workers at the Clarion, and Hagerstown Hotel pays their wages and benefits, court records state.
Chapter 11 protects a company from the threat of lawsuits from creditors while reorganizing its finances.
The company's chief creditor is Ocean Bank in McLean, Va., with a $6.2 million claim, of which $5.5 million is secured.
Ocean Bank helped finance Hagerstown Hotel Associates' $5.65 million purchase of the hotel and conference center in July 1999, according to court records and the Maryland Department of Assessments and Taxation.
Magna Hospitality Group has a $151,813 claim, court records state.
Ocean Bank declined to provide Hagerstown Hotel with up to $450,000 more to continue operating and reorganize finances so the company received an interim order from the bankruptcy court that granted permission to borrow that money from Magna Hotel Associates of Hagerstown LLC. As part of that order, the court gave Magna Hotel Associates a second lien on the hotel property, court records state.
Burruss said Magna Hotel Associates is a part owner of Hagerstown Hotel Associates.
Court records state Hagerstown Hotel Associates' top creditors also include: Turner Enterprises ($65,000), the Comptroller of Maryland ($46,263), Choice Hotels International ($42,204), Allegheny Power ($36,272), Columbia Gas ($26,052) and L.E. Barnhart Investigations east of Hagerstown ($19,240).
Also on the list of creditors with the largest unsecured claims were Artim Seafood northeast of Clear Spring ($13,334) and Advertising Inc. in Hagerstown ($11,670).