Grupo Posadas files for Chapter 11

January 2022 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

January 2022 Issue

In a move aimed at maximising its financial flexibility and better manage the challenges related to the global coronavirus (COVID-19) pandemic, Mexican hotel chain Grupo Posadas, along with one subsidiary, has filed for Chapter 11 bankruptcy protection in the US.

The filing allows the company to implement a prepackaged restructuring plan – a process that is expected to be completed within approximately 60 days given that the necessary support from noteholders has already been obtained.

Moreover, the restructuring plan will reduce Grupo Posadas’ debt service obligations and extend the schedule on which its debt matures by 5.5 years, to 30 December 2027, allowing the company to prioritise the use of cash for operating activities to preserve jobs and help maintain quality.

In addition, subject to court approval, the restructuring plan provides for the exchange of existing notes for new senior notes secured by liens on real estate and certain accounts receivable. All other undisputed claims, including those of suppliers for goods and services provided before as well as during the Chapter 11 process, are unimpaired and will be paid in full in the ordinary course or otherwise satisfied.

The company has also filed a number of customary ‘first day’ motions with the bankruptcy court to support business-as-usual operations during the Chapter 11 process, including continuation of employee wages and benefits, as well as loyalty and vacation club programme benefits.

The leading hotel operator in Mexico, Grupo Posadas owns, leases, franchises and manages 185 hotels and 28,690 rooms in the most important and visited urban and coastal destinations in Mexico.

“This marks the culminating step toward achieving a sustainable capital structure for Grupo Posadas,” said Jose Carlos Azcarraga, chief executive of Grupo Posadas. “This comprehensive debt restructuring, which we announced two months ago as part of our ongoing efforts to maximize our financial flexibility and best manage the COVID-19-related challenges affecting the entire hospitality industry globally, will enable us to emerge from the pandemic as a financially stronger enterprise.”

All day-to-day operations throughout the company’s properties continue as normal, using cash from ongoing operations. The company has also stated that there will be no impact on its relationship with and obligations to stakeholders.

“Appropriately capitalized to meet our go-forward business needs and open exciting new properties as tourism further rebounds, Grupo Posadas will be well positioned to continue operating with the highest standards and remain the country’s leading hotel operator,” continued Mr Azcarraga. “We are grateful to have the support of our valued stakeholders as we take this final pivotal step to strengthen our finances.”

Grupo Posadas is being represented throughout the Chapter 11 and restructuring process by Cleary Gottlieb Steen & Hamilton LLP as international legal counsel, and Ritch, Mueller y Nicolau, S.C. and Creel, García-Cuéllar, Aiza y Enríquez, S.C. as Mexican legal counsel. DD3 Capital Partners is acting as financial adviser.

Mr Azcarraga concluded: “The significant revenue growth we experienced in the third quarter is further proof that Grupo Posadas is poised for long-term success as government restrictions on occupancy continue to ease in many regions in Mexico.”

Fraser Tennant