Mitsui says it has right to sell bank loan
Attorneys and executives for The Mitsui Trust & Banking Co., Ltd., said the bank is well within its rights to look for a buyer for an overdue bank note from KOAR-Tahoe Partners, L.P., owners of the state line Embassy Suites Resort.
El Dorado County Superior Court Judge Suzanne Kingsbury issued a temporary restraining order last week barring the bank from selling, or attempting to sell, a $53 million construction loan granted to KOAR in 1990.
The loan matured last July and is now in default. KOAR allegedly has been unable to pay or refinance the loan due to declining hotel value caused by the hotel’s failure to meet occupancy expectations.
Representatives for Mitsui, along with co-defendant Secured Capital Corporation, hired to find buyers for the loan, will appear before Kingsbury March 2 to show why the order should not be continued as a preliminary injunction.
In a written declaration before the court, Masao Kambayashi, vice president and manager of the Los Angeles Mitsui office, said by the end of November 1997, Mitsui was faced with a borrower that had not paid interest on the overdue $53 million in months.
Kambayashi said that the temporary order issued by Kingsbury would cause Mitsui to “suffer serious and immediate injury.”
Buyers may now decline to proceed with the acquisition or seek a reduced price due to an inability to announce the sale by the Jan. 31 deadline Mitsui had made clear to potential buyers, according to Kambayashi.
Despite allegations to the contrary from KOAR partner Sam Kaneko, the bank executive said he never told Kaneko in a Dec. 5, 1997 phone conversation that, should the bank attempt to sell the loan, KOAR would have a preferential opportunity to buy it.
Mitsui counsel Seth Ribner of the Universal City, Calif. law firm Simpson Thatcher & Bartlett said KOAR didn’t try to buy the loan until “a day after the fact,” and only did so at that point to destroy the sale.
KOAR alleges that the bank violated an agreement to postpone any activities regarding sale of the loan until after KOAR has its day before the South Lake Tahoe City Council, asking the group to allow KOAR to convert half the hotel to time-share units.
KOAR would sell the time shares to Signature Resorts Inc., a company founded by KOAR’s partners, and use the proceeds to fulfill its obligation to the bank.
KOAR says Mitsui agreed to hold the sale of the property pending the conversion while Mitsui claims the bank never made that commitment.
Lawyers for Mitsui are required by the court to have all briefs for the March 2 proceedings filed by Feb. 18. KOAR attorneys must file briefs a week later.
The hearing, scheduled to begin at 2 p.m., is expected to take only half a court day.
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