In re Newark Airport/Hotel Limited Partnership

Newark Airport/Hotel Limited Partnership (Newark) (debtor) owned and operated a hotel near Newark Airport. FGH Realty Credit Corporation (FGH) (creditor) had a mortgage on the hotel. Newark defaulted on payments to FGH, and FGH obtained a foreclosure judgment against Newark in New Jersey state court. However, the foreclosure sale was postponed because Newark filed for Chapter 11 bankruptcy. Following the bankruptcy filing, Newark operated the hotel as a debtor-in-possession and generated enough revenue to pay its expenses and make payments to FGH. The hotel continued to employ over 100 people and had ongoing contracts for private events and room guarantees for airline employees. Newark had also identified a possible funding source for its reorganization plan. Shortly after the bankruptcy filing, while Newark still had the exclusive right to file a proposed reorganization plan with the bankruptcy court (i.e., the exclusivity period), FGH moved in bankruptcy court under 11 U.S.C. § 362(d)(2), seeking relief from the automatic stay so that FGH could foreclose on the hotel. FGH asserted that Newark had no equity in the hotel and that keeping the hotel was not necessary to allow Newark to reorganize effectively. At the same time, Newark made a first request under 11 U.S.C. § 1121(d) for an extension of the exclusivity period. Newark claimed that the extension was necessary because there had been a delay in forming Newark’s official creditors’ committee, Newark had not yet been able to obtain an appraisal for the hotel, Newark had pending accounts-receivable claims against two airlines, and Newark was in the process of appealing FGH’s foreclosure judgment and a related counterclaim in state court. The bankruptcy court considered the motions.