Fujiyama company files bankruptcy


By JOHN BURNETT

Tribune-Herald staff writer

Hawaii Outdoor Tours Inc., the parent company of the Naniloa Volcanoes Resort, filed for Chapter 11 bankruptcy reorganization Tuesday morning in U.S. Bankruptcy Court in Honolulu.

“It’s business as usual,” Ken Fujiyama, Hawaii Outdoor Tours owner and CEO, said Tuesday afternoon. The bankruptcy filing staves off, at least for now, a foreclosure filing by North Carolina-based First Citizens Bank & Trust, which alleges that Hawaii Outdoor Tours is in default of a $10 million dollar construction loan, claiming that Hawaii Outdoor Tours owes more than $9.9 million on that loan.

The filing occurred minutes prior to a scheduled hearing in Hilo Circuit Court on the bankruptcy. That hearing was postponed due to the filing.

“The overall goal is to restructure some of the financial obligations and to get financing to complete the renovation and to exit from bankruptcy,” said Honolulu attorney Neil Verbrugge, who is representing Hawaii Outdoor Tours in the bankruptcy. He said that first-day motions in the case would be heard today in Honolulu.

The bankruptcy petition claims debts of between $10 million and $50 million.

A list of unsecured creditors filed with the court includes: Hawaii Electric Light Co., $169, 291; EZ Computing, $32,656; the county’s Wastewater Division, $32,246; the county’s Department of Water Supply; $25,691; Hawaiian Telcom, $20,267; and Hirayama Bros. Electric, $20,000.

Reading from a prepared statement, Fujiyama said the bankruptcy filing was made “to protect the interests of the hotel’s creditors and employees” and “will not have an adverse impact” on hotel operations, employees or guests. He added that the last two years “have been financially difficult.”

“The hotel is operating in the ordinary course,” added Verbrugge. “The employees will be paid, customer deposits, reservations and stays will be honored and the hotel will continue to operate.”

Verbrugge said Hawaii Outdoor Tours owes the state more than $400,000 in general excise and transient accommodation taxes. The general excise tax delinquency caused the hotel’s liquor license to be placed on inactive status in July.

Fujiyama acquired the hotel in 2006 in an auction for a 65-year lease of the state property with a bid of $500,000 a year. The lease also required Fujiyama to pay $6.1 million to the previous lessee, a Japanese firm.

The foreclosure suit filed by the bank stated that Fujiyama owed the state $760,000 in lease rent.

“He’s still delinquent with the lease rent, as far as I know,” said Gordon Heit, Hilo land agent for the state Department of Land and Natural Resources. “Nothing has changed with that. Where it goes from here, I’m not sure how it’s gonna play out.”

Said Verbrugge: “I think the debtor and the state may have different views of what exactly’s owed.” He didn’t offer an alternative amount on the lease rent.

Fujiyama has defaulted more than once on the $500,000 annual lease payments to the state for the Waiakea peninsula property on which the hotel sits. In 2011, Fujiyama was given permission to cover the lease payments with half of a $1 million performance bond he’d put up for the hotel. Fujiyama missed another semi-annual lease payment earlier this year and the state took $259,000 from the performance bond to make the payment. The bank later restored the performance bond to its full $500,000, it said, to prevent the state from terminating the hotel’s lease.

Fujiyama has in the past blamed a faltering economy and tight credit for his failure to develop the property to specifications of the lease agreement.

A court document states that Fujiyama believes his “cash flow issues … will be resolved by scaling back (the hotel’s) renovation plan, by bringing additional rooms available for guest stays, and generating additional income.”

According to the document, 175 rooms in the Mauna Kea Tower have been “completely remodeled” and 172 “are currently available for guest visitors and stays in these rooms generate the bulk” of the hotel’s operating income. It also states that 91 of 141 rooms in the Mauna Loa Tower have been “partially remodeled, due to financial constraints” and that Fujiyama estimates a less costly refurbishment to be “approximately $10,000 per room.”

The document also states that 62 rooms in the Kilauea Tower received “substantial preliminary modeling work” and the cost for complete remodeling would be “approximately $800,000.”

The document states the hotel’s restaurant currently operates only for breakfast and group events but there are plans to open it for full service in December 2012.

It also states that the hotel has 52 employees, 19 of them full time, 27 part time and six salaried. It placed occupancy to date for 2012 at 45 percent and projects an occupancy rate of 53 percent for 2013.

Hawaii Outdoor Tours gross revenue for 2011 was approximately $3,653 million, with gross revenue to date for 2012 at about $3.932 million and a projected 2012 gross revenue of $4.3 million, according to the document.

Fujiyama’s financial woes with Naniloa Volcanoes Resort come on the heels of his sale of the Nani Mau Gardens in March. Foreclosure proceedings on the Nani Mau property — 53 acres including a botanical garden and restaurant — alleged Fujiyama was in default on loans to acquire the property in the amount of $3 million.

Tribune-Herald staff writer Hunter Bishop contributed. Email John Burnett at jburnett@hawaiitribune-herald.com.

 

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