SAN JOSE — The owner of a bankrupt hotel in downtown San Jose has won a major victory in court that greatly smooths the path for the shuttered property to reopen its doors to guests.
The court win emerged on Tuesday when a bankruptcy judge sided with the owner of a shuttered landmark hotel popularly known as the Fairmont San Jose in a ruling that edges the hotel closer to reopening as a lodging under the Hilton brand.
“This is an important victory not just for the hotel, but for all of downtown San Jose, the business community, and the eventual re-opening of the hotel,” said Sam Singer, a spokesperson for the owner of the 805-room double-tower hotel at 170 S. Market St.
A committee of creditors had filed new objections to a comprehensive plan to reorganize the hotel’s crumpled finances.
The creditors issued an objection that sketched out several concerns that focus primarily on the uncertainties regarding the costs to reopen the hotel and then to operate with financial stability.
But on Tuesday, a U.S. Bankruptcy Court judge overruled the objections from the unsecured creditors and issued a ruling in favor of the hotel owner.
The hotel, which closed abruptly in March when its owner filed for bankruptcy, is slated to become a Hilton Signia hotel and was previously known as the Fairmont San Jose.
The owner of the hotel disclosed in May that it had picked Hilton Hotels & Resorts as the new operator and that Hilton had agreed to inject considerable cash into the property to help get it back on its feet.
“The Hilton bid contemplates that the hotel will assume the name ‘Signia by Hilton San Jose’ or another name that includes ‘Signia’ in it and that it will be managed by Hilton upon its reopening,” the hotel owner stated in court documents filed in May.
With the judge’s new ruling on Tuesday, the bankrupt hotel has the court’s permission to distribute on June 25 its formal plan of reorganization to all of its creditors, according to attorneys for the bankrupt hotel.
The creditors will then determine whether they support or oppose the plan to reorganize the hotel’s crumpled finances.
The hotel owner has made it clear that it seeks to terminate its existing management contract with Accor Management U.S. and to find a new operator that is willing to inject about $45 million in capital into the facility.
In late May, the hotel owner said Hilton Hotels & Resorts was the winning bidder and that the hotel would be re-branded as a Hilton Signia.
It also has become clear that the hotel owner became adversaries with Accor Management starting in March 2020, which is around the time that the coronavirus jolted the finances of the Fairmont and hotels worldwide.
In the court proceeding, the hotel owner found new allies in the battle to reopen the hotel and steady its finances.
“The hotel had the affirmative support of its mortgage lender and Unite Here Local 19, indicating the need to put hundreds of individuals back to work,” Singer said.
San Jose city officials also chimed in during the court hearing on Tuesday prior to the judge’s ruling, according to the hotel’s attorneys.
“The city of San Jose impressed upon the court the importance of getting the hotel reopened to the local economy,” Singer said.