Judge allows $500M creditor claim in JQH bankruptcy

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The judge overseeing the John Q. Hammons bankruptcy settlement has allowed a nearly $500 million damages claim by JD Holdings LLC, the largest creditor in the case.

During a Feb. 28 hearing, JD Holdings first received verbal court approval to allow the settlement – detailed in a courtroom minute sheet – which specified the damages and laid out JD Holdings’ planned acquisition of John Q. Hammons Hotels & Resorts’ remaining 35 hotels and other assets in Hammons’ trust.

On March 6, Judge Robert Berger of the U.S. Bankruptcy Court District of Kansas formally upheld JD Holdings’ $495.9 million claim against all associated debtors, according to the court order.

Berger also overruled all objections filed against the settlement, including the city of Springfield’s objection to JD Holdings’ potential purchase of Hammons Field and Missouri State University’s general protest of the agreement, related to JQH Arena.

A group of financial institution creditors, collectively referred to as commercial mortgage-backed securities lenders, also had filed an objection to the damages, alleging JD Holdings had no right or evidence to back such a claim. The group represents more than $783 million in defaulted Hammons debt.

Objecting to the overall settlement, the lenders also argued that the agreed upon plan went “beyond a settlement of the differences between (JD Holdings) and the debtors” and sought “impermissibly to fundamentally alter the rights of creditors on shortened notice,” according to court filings.

On Feb. 15, the bankruptcy court had granted a shortened objection period and expedited hearing on the settlement, which was signed by co-trustees of the Hammons estate, Jacquie Dowdy and Greggory Groves.

The damages claim arose from JD Holdings’ yearslong legal battles with the Hammons estate. In 2012, JD Holdings owner Jonathan Eilian claimed a breached agreement after his company helped JQH Hotels go private in 2005.

The arrangement resulted in JD Holdings acquiring indirect ownership of 43 of Hammons’ hotels and management of 15 others, as well as securing a right-of-first-refusal agreement to purchase other assets from Hammons’ estate if an associated debtor defaulted on obligations set forth in the agreement.

JQH Hotels and Hammons’ estate subsequently filed Chapter 11 bankruptcy in 2016, halting the litigation.

Last month, Eilian agreed to stay all pending appeals and settle for the nearly $500 million claim in line with the bankruptcy settlement. Eilian is arranging $1 billion in financing for the asset purchases.

The ultimate exit from the bankruptcy proceedings will be a confirmation hearing that has not yet been scheduled. In the meantime, Berger ordered JD Holdings to submit an amended disclosure statement by March 16.