The Renaissance hotel on Bluebonnet Boulevard has been open for nearly a year and a half now, but a federal lawsuit over its early financing efforts is just getting interesting.
Since January, a flurry of sealed motions and exhibits have flown back and forth between Baton Rouge developer Mike Wampold and his longtime financial partner, Wachovia Bank, now Wells Fargo & Co. Wampold sued Wachovia in 2010 over a financing arrangement that allegedly delayed construction of the hotel for three years.
According to court filings, Wachovia agreed to provide a $42 million letter of credit so Wampold’s Bluebonnet Hotel Ventures could issue tax-exempt bonds to pay for development, and also proposed underwriting the bonds. As the parties finalized the transaction, they also signed an interest-rate swap agreement to allow BHV to hedge against variable interest-rate risk in connection with the bonds that Wachovia was to underwrite.
The problem is that after the swap, Wachovia never issued a letter of credit, and over time Wampold paid $3.5 million to the bank without being able to secure financing for the project, according to court documents. That halted construction of the hotel, and Wampold says he lost out on numerous investors interested in funding the equity portion of the project, as well as a deal to land a Dickie Brennan’s restaurant.
Wampold’s lawsuit seeks to rescind the swap agreement without the threat of a $6.2 million early termination fee, as well as damages for the delay in construction. Judge James Brady dismissed a negligence claim in 2011 but declined to throw out the rest of the case.
Wachovia counters that Wampold is seeking a “redo” on his obligations because the financial return on the swap proved unfavorable. Both parties spent much of 2012 securing depositions, and several motions are now pending before the court, including summary judgment requests from both sides.
