KOAR, Embassy Suites developer, files bankruptcy

Friday, May 15, 1998 | 12:01 p.m.

The action forestalls foreclosure, KOAR-Tahoe Partners said Thursday, adding that the soft Tahoe economy is partly to blame.

KOAR added it was unable to find financing to retire the $53 million construction loan held by Mitsui Trust & Banking Co.

The next step, KOAR said, will be to seek Chapter 11 protection of Embassy Suites as an asset, and court approval "to continue to operate the hotel with existing management and employees in the ordinary course of business."

KOAR spent the past two weeks trying to line up $5.1 million in bonds to satisfy a court order to cover $4.6 million in delinquent interest payments and $450,000 worth of legal fees.

The bonds were ordered by a judge as part of a preliminary injunction preventing Mitsui Trust from proceeding to foreclosure on the sale of the loan to a third party. KOAR's attempt to challenge the amount of the bonds was rebuffed May 13 by the court.

Previous efforts to convert 188 of 400 rooms to time shares and use the income to satisfy its loan failed. Also standing in the way of the conversion was a city-enacted moratorium on new time shares.

KOAR built the hotel in the early 1990s with the seven-year construction loan from Mitsui. KOAR's loan went into default last summer, after a harsh winter twice forced the closure of U.S. Highway 50 east of Placerville.