When the Claim Was Twice the Asset
Valuing a select-service hotel in Chapter 11 — and proving a plan the reorganized business could actually perform, through confirmation and appeal.
The matter in one screen
A claim that made reorganization arithmetically impossible.
Our client owned a nationally-flagged select-service hotel on Florida's Treasure Coast. The hotel came through the downturn near 46% occupancy at roughly a $90 rate — enough to cover operations, nowhere near enough to service the debt it carried. The company filed Chapter 11.
Its secured lender then filed a proof of claim for ≈ $10.75M — a number that made reorganization arithmetically impossible. No plan built on a 46%-occupancy select-service hotel carries a $10.7 million secured obligation. The case turned on one question the debtor could not answer with assertions: what is this hotel actually worth?
Establish the value. Prove the plan performs.
Valued the collateral independently
We built a going-concern discounted-cash-flow valuation and put the collateral at ≈ $4.53M — establishing that roughly $6.2M of the asserted claim had no asset behind it. That finding reset the posture of the entire case.
Modeled eleven years, not five
We projected the hotel line by line across a full cycle — occupancy, rate, departmental cost, franchise and management fees, capital reserve — so feasibility was tested across the cycle, not a convenient window.
Stress-tested competing plan structures
We modeled the reorganized capital stack under a market-rate restructure and under the lender's §1111(b) election, carrying each through every claim class — secured tax, unsecured, convenience, administrative, and franchise cure.
Quantified the cost of the lender's own election
Our analysis showed §1111(b) treatment left the lender roughly $2.27M worse off against the collateral's actual value — turning the valuation from a defensive position into a negotiating instrument.
A $10.75M claim against a $4.53M asset.
Two structures, carried through every class.
| Plan modeled | Market-rate restructure | Lender §1111(b) election |
|---|---|---|
| Secured treatment | $4.25M @ 5.25% / 30 yr | $5.01M @ 5.25% / 25 yr |
| Annual debt service | $281,624 | $360,269 |
| Payments over 10 years | — | $3,946,208 |
| Balloon at year 10 | — | $6,799,928 |
| Recovery vs. collateral value | — | ($2,266,758) |
The §1111(b) column reflects total payments over the ten-year plan term plus the residual balloon, measured against the DCF value of the collateral.
Can the reorganized hotel actually pay?
A plan is confirmable only if the reorganized company can perform it. NHCG's model carried the hotel's operations and the full plan-payment stack side by side, year by year — so feasibility was demonstrated, not asserted.
| Reorganized operations | Yr 1 | Yr 3 | Yr 6 | Yr 11 |
|---|---|---|---|---|
| Occupancy | 46% | 48% | 49% | 57% |
| Average daily rate | $90.16 | $90.57 | $91.76 | $93.45 |
| Total revenue | $1.47M | $1.54M | $1.59M | $1.88M |
| Net income before plan | $360,812 | $419,955 | $429,804 | $529,432 |
| Net income after plan payments | ($31,597) | $47,030 | $54,607 | $169,164 |
The model showed the pattern a court needs to see: an entity that absorbs the heaviest burden in year one, turns positive by year three, and strengthens as occupancy and rate recover. Feasibility was demonstrated on the hotel's own performance, not forecast on good fortune. The plan was confirmed under the §1111(b) election elected by the lender's counsel.
The model didn't just survive appeal — it became the court's framework.
The lender appealed confirmation to the U.S. District Court, challenging the plan on three fronts at once — the valuation of its collateral, the §1111(b) treatment of its secured claim, and confirmability itself. Its central argument was that the reorganized hotel's cash flow was too thin to perform the plan.
The District Court did not resolve that as an abstract question. It went into the mechanics of the distribution waterfall, testing class by class whether the plan could carry its obligations under stress — and it worked from NHCG's model to do it. NHCG was called on throughout to explain the projections, run alternative distribution structures, and identify where the waterfall could be adjusted without breaking feasibility or shorting a class.
The court affirmed confirmation, adopting NHCG's model with modifications to the distribution waterfall that resolved the lender's objection. The analysis did not merely survive appellate scrutiny — it became the framework the court used to decide the appeal.
Valuation, restructuring, and hotel operations — in one team.
Valuation
Going-concern DCF valuation · Collateral value determination · Secured vs. unsecured bifurcation · Expert-grade valuation support.
Bankruptcy & Restructuring
Plan-of-reorganization design · §1111(b) election analysis · Class-by-class treatment modeling · Appellate support and testimony.
Hotel Operations
Multi-year operating projections · Occupancy and ADR modeling · Departmental expense analysis · Franchise, management, and reserve.
The filed claim is an opening position, not a fact.
NHCG provides going-concern valuation, feasibility modeling, plan architecture, and expert-grade support for hotel and commercial bankruptcies — the analysis that establishes what an asset is worth and proves a reorganized business can carry it, through confirmation and appeal.
About this case study. Drawn from NHCG's engagement work product. The client's identity and certain identifying details have been withheld and headline figures rounded to protect confidentiality. Nothing here is legal, tax, or investment advice.