The owners of two financially troubled Sonoma County hotels are asking creditors to approve bankruptcy plans that allow them to hold on to the properties.
The 104-room Days Inn in Santa Rosa remains open while owners Inderjit "Andy" Kalia and Joy Mukherji try to reorganize the business. They owe creditors more than $10 million, according to filings in U.S. Bankruptcy Court in Santa Rosa.
In another bankruptcy case, hotel owner Kirk Lok has submitted a debt restructuring plan for his Quality Inn in Petaluma. The 109-room property also remains open, but Lok's Redwood Empire Properties Inc. is about $4 million in debt.
Hotels are feeling the strain of a lingering economic downturn, with foreclosures up 27 percent over the last three months, according to Atlas Hospitality Group, an Irvine research and marketing firm that tracks the industry.
With business and leisure travel at historic lows, many hotel owners can't make payments on loans they took out during the boom years, analysts said.
More than 100 Bay Area hotels were in default or foreclosure in the first quarter, Atlas said.
Days Inn filed for bankruptcy protection last year to fend off foreclosure after business there fell 40 percent.
"It's a tough time for hotels in Sonoma County," said Steve Olson, an attorney who represents Kalia and Mukherji.
The Days Inn bankruptcy includes another Santa Rosa property owned by Mukherji and Kalia. Valley of the Moon Plaza, a commercial parcel on Highway 12, has a gas station and convenience store.
In a Chapter 11 plan filed last week, the couple proposed to pay off its debts over an extended period, using revenue from the businesses.
The alternative — sale of the Days Inn and Highway 12 parcel — would provide little money for unsecured creditors, they said.
Days Inn is worth about $3.8 million, according to the plan. The couple owes about $3.4 million to lender Heritage Bank and more than $500,000 to the Sonoma County tax collector.
The couple owes about $4.5 million to lenders on Valley of the Moon Plaza and also has some unsecured debt.
On May 7, U.S. Bankruptcy Judge Alan Jaroslovsky will consider sending the plan to creditors for a vote. If it isn't backed by enough creditors or approved by the judge, the properties could be sold.
Lok sought bankruptcy protection for Quality Inn in September after the hotel saw its business fall dramatically. Still, Quality Inn is doing better than most Sonoma County lodging properties, according to Lok's reorganization statement.
He has proposed terms for repaying creditors over an extended period from future hotel revenues. Unsecured creditors probably won't get a distribution if the property is sold in a distressed market, according to the Lok's filing. The deadline for a decision on the plan is June 15.
Lok also owns a Fairfield Inn & Suites hotel in Sebastopol, but it isn't affected by the Quality Inn bankruptcy.
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