DALLAS - Austin, Texas' airport hotel is seeking new terms from creditors to resolve a longstanding default on $40 million of bonds issued 16 years ago.
Negotiations reopened after the debt was acquired by a new investor, according to Patricia Van Buren, manager of the business assurance division at Austin-Bergstrom International Airport.
"The parties are trying to negotiate a restructure," Van Buren said. "All avenues are being considered."
With hotel revenues falling short of debt service, the Hilton-operated hotel has accrued $4.68 million in back interest, according to a disclosure filed Jan. 28. UMB Bank is trustee for the bondholders.
The bond issuer, Austin-Bergstrom Landhost Enterprises, Inc., made a $1.28 million interest payment on Jan. 28, according to the disclosure.
The issuer is a nonprofit created by the city and controlled by a board made up of city officials, including Austin Treasurer Art Alfaro. The city is not obligated for the bonds, which were issued without ratings in 1999.
The bonds were used to convert a building at the former Bergstrom Air Force Base into a hotel for the new airport that opened at the site. The base was closed in the Base Realignment and Closure process, making it available as the city's airport.
Shortly after the hotel opened in 2001, the events of Sept. 11 caused massive disruptions in air travel, knocking revenues off track, Van Buren said.
A restructuring of the debt was announced in 2005. However, the subsequent recession again disrupted revenue, she said.
Van Buren said the Hilton's occupancy is "well north of 80% and ranks consistently above the Hilton benchmark.
"It's the debt burden that's trying to find a solution," she said.
Van Buren said she could not speculate on when the parties might reach a resolution.
