Last updated: 02:45 PM ET, Tue June 28 2016

John Q Hammons Hotels Files for Bankruptcy

Hotel & Resort | Patrick Clarke | June 28, 2016

John Q Hammons Hotels Files for Bankruptcy

Photo via Twitter/KNWA News.

John Q. Hammons Hotels & Resorts has filed for Chapter 11 bankruptcy in Kansas City, Kansas amid ongoing legal struggles, the Wall Street Journal reported.

The Springfield, Missouri-based hotel chain, which owns 35 hotels in 16 different states, is facing the possibility of having to sell its hotels ahead of a trial that was scheduled to begin next month.

The Revocable Trust of John Q. Hammons, John Q. Hammons Hotels & Resorts and related companies are scheduled to go to trial July 26. However the bankruptcy filing is likely to put the trial on hold at least temporarily.

The issue stems from a 2005 agreement in which Hammons agreed to sell the chain's portfolio of more than 40 publicly-owned hotels under the expectation that his trust would receive more than $335 million, according to the company. Nonetheless the opposition claims that entities associated with investor Jonathan Eilian loaned Hammons $300 million and that the hotel chain failed to comply with the terms of the deal.

In 2014, the Delaware Court of Chancery upheld various aspects of the decade-old agreement. One key aspect was the requirement that the 35 hotels currently owned by Hammons' trust be sold for cash by the later of two deadlines.

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While a result still looms, the company addressed the bankruptcy declaration earlier this week.

"We want to ensure that the company Mr. Hammons built over 50 years and the financial and philanthropic commitments that he made have the opportunity to continue to thrive," the hotel chain's CEO Jacqueline Dowdy said during a recent news conference, per the Springfield News-Leader

"A financial restructuring associated with Chapter 11 will help to provide the necessary framework and the safeguards to let us be there for our creditors, lenders, employees, guests and members of the community who benefit from the continued generosity of our legendary hotelier."

Dowdy added the company is "financially stable" and said the filing will have no negative impact on guests or employees.

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