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Bankruptcy auction of Boston hotel expects to yield Irish green

The famed Mandarin Oriental Boston hotel is headed for the auction block. If a US bankruptcy judge approves the sale, it could bring much needed cash to the hotel's financially strapped owners.

A prized luxury property in the Back Bay area, the hotel was built for $300 million in 2008. Later, the Anglo Irish Bank Corp. bought a controlling interest in the property. Like many other businesses, however, the bank was brought to its knees during the most recent US financial crisis. So the Irish government nationalized the bank and created the Irish Bank resolution Corp. to manage its assets.

Recent sales of luxury hotels in Boston bode well for this deal. In 2013, the Park Plaza hotel sold for $250 million. Last year, the Boston harbor hotel netted $166 million. With a five-star rating and 178 units, the Mandarin Oriental is poised to fetch top dollar in today's hot luxury property market.

Many businesses, small and large, seek debt relief in bankruptcy filings. The most common of these filings is Chapter 11, often referred to as reorganization bankruptcy. Chapter 11 allows many debtors to remain possession of their assets and control their business during the reorganization process. Filers like these are known as "debtors in possession."

For some Chapter 11 filers with debts of less than $2.4 million, there is also the option of proceeding as a "small business case." These cases generally proceed much faster than other bankruptcy filings. However, the small business cases are subject to much greater trustee oversight than debtors in possession.

Regardless of the type of filing, many filers like the Mandarin Oriental's owners are able to take advantage of favorable market forces to dispose of their debts and reorganize their businesses.

Source: The Boston Globe, "Bank Liquidators Seek Auction of Mandarin Oriental Boston Hotel," Taryn Luna, April 23, 2015

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