Tourists and workers were assured Tuesday that the Maui Prince Hotel will operate continuously through foreclosure, although there will be some loss of jobs.
The hotel was foreclosed on a week ago, and Prince Resorts Hawaii released a statement Monday saying it would end its management of the hotel Sept. 16 because it could not get funding assurances from the trustee for the lender.
Barry Sullivan, attorney for the trustee, said Tuesday that two experienced hotel management companies with strong local connections are interested in taking over operation of the hotel.
The Maui Prince Hotel, as seen from the ocean on Tuesday, will remain open during its period of foreclosure proceedings, trustee attorney Barry Sullivan said Tuesday. Two experienced hotel management companies are interested in taking over the hotel, he said.
The Maui News / MATTHEW THAYER photo
At a news conference Tuesday in Honolulu, Sullivan said he was confident that a seamless transition would occur, and that the lender had arranged sufficient financing to cover accounts with suppliers and vendors and to meet payrolls, including a payday coming Friday.
However, the lender itself, although it has foreclosed, has not taken possession of the property and is legally powerless to "do anything but sign checks."
The trustee, Wells Fargo Bank, has asked the 2nd Circuit Court to appoint a receiver. The receiver would protect the assets and select a new management company.
Sullivan asked for an emergency hearing on the receivership, within 48 hours, although he said 2nd Circuit Judge Shackley Raffetto could appoint a receiver and team without a hearing.
Meanwhile, he wanted to counter national news stories that he fears may be chasing tourists away from the struggling hotel, which, he said, is losing more than a million dollars a month.
He said visitors could continue to make reservations for the period up to and beyond Sept. 16.
Donn Takahashi, president of Prince Resorts Hawaii, said Tuesday he was struggling to come up with payroll money, but Sullivan said the lenders had taken care of that.
In a statement issued late Tuesday, Takahashi said the hotel has been left with "very serious funding issues that are clearly the responsibility of the owner and lenders."
Past due amounts, which are the obligation of the hotel owner, exceed $1 million, he said.
Neither the owner nor lenders has provided or agreed to provide funds for the next payroll for employees, which is due today, he said.
On Monday, Prince Resorts notified its employees under the Dislocated Workers Act that they would receive 60 days pay and benefits in any case. The state Department of Labor and Industrial Relations mobilized its Rapid Response Team to assist employees as it did, for example, when Molokai Ranch shut down.
However, it now appears that a relatively small number of workers would stop working.
Willie Kennison, Maui Division director of Local 142 of the International Longshore and Warehouse Union, which represents around 200 union workers at the hotel (one quarter of whom are already on furlough), said it was uncertain how many workers a new management company would retain, but also uncertain how many current employees would want to continue.
Some, if offered a severance package, might decide to retire, he said.
"It's bad," he said Tuesday. Many, many resorts are having difficulty in coping with high debt loads when tourism is down so much, and the union has agreed in a number of cases to concessions.
That was the case at the Prince earlier this year, when a two-year contract extension provided for 49 furloughs, although the workers did maintain seniority and some other benefits.
Sullivan said that when the lenders asked for financial reports from Maui Prince, they were shocked to find the size of the losses.
And they also were disturbed that the first reports were quickly amended to show much greater losses.
In fact, it looks as if the hotel is not taking in enough money even to cover payroll, much less other running expenses and taxes, he said.
Nevertheless, the lenders felt it was important to keep the hotel open, even if it means they are signing checks without - so far - any control. The lenders judged it would be much better to throw in more money to keep operating rather than to let the hotel go dark and then try to reopen it.
Kennison agreed. The example of the Renaissance Wailea, which was closed to be rebuilt, is an example of how that plan has failed, he said.
The hotel has never reopened, and its workers are stuck. The owners have not said what they intend now, but rumors persist that rebuilding has been abandoned and the owners would like to reopen the hotel.
Even that would take a large investment in repairs. "They tell me the plumbing goes first," Kennison said.
Sullivan said as lawyer for the trustee, he could do nothing directly except plan. The plan is to continue the Prince in at least the quality it has been, three stars. The would-be new operators have local experience in three-star and better hotel operations in the islands, he said.
The purchase of Makena Resort from Seibu Group, which built it in 1985, was supposed to lead to, among other things, the replacement of the hotel. Small by standards of Maui luxury resorts and somewhat remote from resort destinations, the Maui Prince long had a good reputation - and a reputation for not being very full.
In its heyday, Seibu could afford to run a mostly empty hotel. The company was built on railway real estate in Japan and before the bubble popped had parlayed that into a string of related and unrelated businesses. One of its department stores alone did more than a billion dollars of business a year.
After developing the Maui Prince and Makena Resort, Prince Hotels built other hotels on the Big Island and in Waikiki. These are separately owned and managed by Prince Resorts Hawaii, Takahashi said. Since the sale to Maui developer Everett Dowling and his group of investors, the Maui Prince has been managed by but not owned by Prince.
The sale included a requirement that Prince continue to operate the hotel.
It has significantly underperformed other island resorts in its class since then, Sullivan said. All resorts are down, but Prince results, measured by occupancy rates, are about 27 percent lower than average.
A new operator will be expected to control costs and build business. The Maui Prince recently announced a $99 per night special on rooms. It applies to rooms Sunday through Thursday nights.
"The lender wants a solution, but it has now become evident that there are serious operational concerns," said Sullivan. "Maui Prince had been unable or unwilling to provide the lender with an accurate projection of losses and cash needs."
Although a statement from Takahashi on Monday said the lender had not made operating funds available, Sullivan said it had.
On the same day, he said,
it had advanced another $247,000 to pay vendors and suppliers of the hotel.
He noted that Seibu took $575 million in cash from the sale.
He said Prince demanded that the trustee assume $9.3 million of accrued benefits (vacation and the like) due to ILWU members as the cost of continuing to run the hotel.
"Maui Prince had been requiring a solution that involved the lender effectively assuming all of Maui Prince's obligations dating back to 1986," Sullivan said.
The lender considered that a Prince obligation, since it occurred during Prince ownership and operation.
That and other factors led the trustee to consider Prince management expendable, although Sullivan said it would be up to the receiver to chose an operator, which could again be Prince.
The Prince management has assured its employees that it would cover its obligations to them, including severance packages and vacation.
The receivers nominated to the court are attorneys Miles Furutani and George Van Buren.
The rest of the team would include Steven Mau as general counsel; Anna Elento-Sneed as labor counsel; and Peter Herndon as hotel management and transition adviser.
Including its union staff, the Maui Prince employs about 380 people full time, part time and as casual workers.
* Harry Eagar can be reached at email@example.com.