By JAMES FINK
Business First

Less than one day after placing the ownership of the Statler Towers into involuntary Chapter 11 protection, the first court hearing connected with the high-profile case has been scheduled.

Lawyers representing Park Lane Catering filed the involuntary Chapter 11 protection petition against BSC Development Buffalo LLC, owner of the Statler, in the Western New York district of U.S. Bankruptcy Court. Those representing BSC Development and National Fuel Gas Corp. are expected in federal courtroom of Hon. Carl Bucki, the court's chief judge, this afternoon.

National Fuel is seeking a $115,810 post-bankruptcy security deposit from BSC Development to cover two months of operating costs for the cash-starved Statler. The Amherst utility is already owed more than $210,000 in pre-bankruptcy debts from BSC Development for overdue payments. National Fuel has in recent weeks threatened to shut off service to the building unless payments were made.

"Our action is designed to protect the customer and the company," said Julie Coppola Cox, National Fuel Gas spokeswoman. "The fact of the matter is that while the Statler was forced into bankruptcy, it does not change the fact that we cannot dismiss our responsibility to the more than 500,000 customers in Western New York we serve. Uncollected bills are factored into the rates we all pay."

The involuntary bankruptcy petition, which had been anticipated for a few weeks, triggered National Fuel's action before Bucki.

The bankruptcy filing came after another round of failed negotiations between Park Lane Catering - one of the Statler's anchor tenants - and BSC Development, a company headed by British investor Bashar Issa, who acquired the Delaware Avenue landmark three years ago.

David Pfalzgraf Jr., Park Lane Catering's attorney and a partner in the Buffalo law firm of Rupp Baase Pfalzgraf Cunningham & Coppola LLC, said the Chapter 11 petition serves several legal and practical purposes, including putting the 18-story building into the hands of a court-appointed receiver and offering greater assurance that the Statler will remain open.

Pfalzgraf said he hopes Bucki names Buffalo businessman Stephen Leous as receiver. Leous was named receiver by state Supreme Court Justice Hon. John Curran as part of a separate lawsuit filed against BSC Development by Park Lane Catering. The bankruptcy filing takes legal precedence over the lawsuit Park Lane Catering filed in December.

Leous could not be reached for comment.

"The filing was also made to ensure that the utility service remain on for the foreseeable future," Pfalzgraf said.

Cox said National Fuel felt it had to bring its own action to the bankruptcy court given the Statler's unstable finances. The building is losing nearly $80,000 per month, according to court testimony. It has approximately 25 tenants and has not signed a new tenant in more than 18 months. Several tenants have left, and some who have remained have withheld monthly rent payments.

Pfalzgraf called the bankruptcy filing a "positive development" for the building and its tenants.

"It will ensure that Park Lane Catering remains open for business in the near and long-term future and will ultimately be sold to a third party through the bankruptcy-court process," Pfalzgraf said.

Park Lane Catering has more than 200 events booked in the Statler's Golden Ballroom or Rendez-Vous rooms in the next few years. It reports that it has lost more than $1 million in bookings because of the building's uncertain future.

William Koessler, Park Lane Catering owner, is working with a group of Chicago-based investors who want to purchase the building and have pledged to make more than $70 million in renovations to it.

Both Koessler and Pfalzgraf stressed that all booked events at the Statler will take place as planned.

Issa pledged to spend more than $100 million renovating the Statler and restoring it back to its past glory. Issa began some of the work, but renovations have all but stopped for the past year as Issa is facing financial and legal troubles both in Buffalo and in Manchester, England.

The involuntary Chapter 11 proceeding, under the U.S. Bankruptcy Code, provides a stay for most of the Statler's creditors. Utilities have 20 days to negotiate with a court-appointed receiver on a payment schedule. If no willing receiver can be found, Park Lane Catering may be forced to petition the bankruptcy court to change the involuntary Chapter 11 filing into a more restrictive involuntary Chapter 7 filing.

The Chapter 11 filing is being handled for Park Lane Catering by Garry Graber, a partner with the Buffalo law firm Hodgson Russ LLP.

For now, the Statler is still owned by BSC Development Buffalo, and Issa's father, Mohmoud al Issa, continues to hold the $4.5 million mortgage he took out on the building last May.

Many feel a receiver appointed by the bankruptcy court might be able to break the logjam between potential buyers of the building and the Issas.

"The tenants of the Statler as well as all of the individuals who have events scheduled with the Park Lane can breathe easier in knowing that the building will remain open and fully operational for the time being," Pfalzgraf said.