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Baltimore Hilton dips into reserve fund to make $3.7 million in interest payments

The city-owned Baltimore Hilton Hotel has been burning through millions of dollars of reserve funds and transfers from the city to stay on top of its roughly $260 million of debt, according to recent disclosures to bondholders.

The downtown Baltimore hotel, which looks over Oriole Park at Camden Yards and the city’s convention center, lost about $20.4 million in 2020, according to filings to bondholders, after being battered by the coronavirus pandemic, effectively shutting down for a year in April 2020 and temporarily turning into a field hospital.

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Bondholders were notified this week that the hotel was using more than $3.7 million of reserve funds to pay interest on its bonds. This appears to be the first time the Baltimore Hilton has had to dip into its $18.8 million reserve fund since it refinanced those bonds in 2017.

Susan Yum, a spokesperson for the Baltimore Development Corp., which oversees the Baltimore Hilton, was optimistic about the hotel going forward.

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“We are seeing a steady increase in short-term bookings and business is now building after a very challenging 2-year period,” Yum said in an email. “However, large conventions have been slower to return than transient stays like leisure tourists.”

Yum called the Central Intercollegiate Athletic Association tournament, held in Baltimore last month, “a positive signal that large scale events are beginning to happen,” but was cautious.

“We are confident that our hotel business will recover, but with uncertainty still in the marketplace over potential COVID-19 variants, there is not a firm timeline,” she said. “We do believe there is significant pent up demand.”

The Baltimore Hilton, like other hotels, was battered by the coronavirus pandemic, effectively shutting down for a year in April 2020 and temporarily turning into a field hospital. The hotel has had the rating on its bonds downgraded recently and lost about $20.4 million in 2020, according to filings to bondholders.

In August, the city of Baltimore transferred more than $9.5 million to the Baltimore Hilton to pay down its debts, due Sept. 1, and transferred an additional $3.3 million to pay its property taxes, according to filings. That came after the Baltimore Hilton pulled nearly $6 million from two different reserve accounts — one of which was for furniture and equipment — to make bond payments in August 2020.

The most recent publicly available financial audit of the Baltimore Hilton covers 2019 and 2020, the first year of the pandemic. The closing of the hotel for the pandemic did reduce annual expenses from $64 million in 2019 to $40.8 million in 2020, half of that driven by reduced salaries.

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However, revenue plunged from $65.6 million in 2019 to $20.4 million in 2020.

The hotel has struggled for years to achieve profitability.

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The Baltimore City Council approved about $300 million of bonds in 2006 to construct the hotel, which was championed by then-Mayor Martin O’Malley. The 757-room hotel opened in 2008. Less than a decade later after opening, the city refinanced the debt, issuing about $270 of new bonds.

The hotel still owes roughly $260 million to bondholders and will pay an additional $220 million in interest over the next two decades, according to its financial statements.

In 2021 alone, the hotel owed $13 million in interest.

Full financial filings for 2021 are not expected to be released until fall 2023, but recent filings indicate the hotel continued to struggle throughout the pandemic.

In 2018, S&P Global Rating gave the Baltimore Hilton bonds a rating of BBB-. Starting in March 2020, S&P repeatedly downgraded the bonds, settling on CCC in March 2021. A downgrade generally means analysts believe there is a greater risk of an entity defaulting on its debt.


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