KOAR going back to court for more
Although the struggle for control of the state line Embassy Suites was to be settled after the hotel’s developers and the bank trying to sell its overdue loan had their day in court, it wasn’t.
El Dorado County Judge Patrick Riley, hearing the case after Mitsui Trust & Banking Co. Ltd., moved to disqualify Judge Suzanne Kingsbury, has set another court hearing for April 20 in Placerville.
Mitsui attorneys filed a motion to dismiss Kingsbury, claiming she was prejudiced, after the judge issued a temporary restraining order in January blocking the bank from selling the loan.
KOAR-Tahoe Partners, L.P., the group which developed the hotel with a $53 million, seven-year construction loan from Mitsui, was unable to pay the debt by a July 1, 1997 deadline.
Claiming KOAR hasn’t paid any interest on the loan since the deadline passed, Mitsui attempted to sell the outstanding debt to a third party, prompting KOAR to sue to stop the sale.
KOAR attorneys believe the proposed sale of the debt would have a detrimental effect on their interests while Mitsui attorneys claim the sale likely would not hurt KOAR.
Court sources said Riley will reach a decision around mid-May.
KOAR’s plan to pay the bank includes a conversion of approximately half the hotel’s suites to time shares. After gaining South Lake Tahoe City Council approval for the conversion, KOAR is scheduled to begin the conversion process May 1.
According to the time-share proposal, KOAR would sell the converted units to Signature Resorts, Inc., a company specializing in time shares and controlled by KOAR’s partners.
The developers estimate it would take about six years to complete the conversion process and raise $35 million toward the overdue loan.
KOAR has not divulged a plan to raise the other $18 million, plus interest, which still would be owed to the bank should the conversion to time shares be successful.
Mitsui attorneys claim the bank wants no part of the time-share conversion and never had an interest in it.
Central to the case before Riley is KOAR’s assertion that Mitsui representatives gave them verbal assurances the bank was interested in pursuing the conversion. Mitsui attorneys deny this claim.
After the April 20 hearing, Riley can either rule for KOAR and continue Kingsbury’s restraining order as a preliminary injunction pending a late summer trial, or rule for Mitsui and allow the bank to pursue the sale of the overdue note.
Attorneys for Mitsui said the overdue note is currently accruing about $18,000 of interest per day.
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