As the news spread about a pending foreclosure against the owners of Turtle Bay Resort, residents reacted out of concern for employees and with renewed hope of curbing a proposed development at Kawela Bay.

Credit Suisse has filed a $283 million mortgage foreclosure lawsuit against Kuilima Resort Co, which has proposed an expansion on the 880-acre Turtle Bay Resort that could result in up to five new hotels with 3,500 rooms and condominium units, as well as four public parks.

A spokesman for Turtle Bay tried to reassure hotel workers and said the company won't file for bankruptcy, though that could buy the company time as it sorts out its options.

"Kuilima Resort Co. is going to work with the lender to work out some kind of amicable agreement," said Nathan Hokama, spokesman for Kuilima Resort Co. "It shouldn't affect the day-to-day operations of the hotel."

Hokama did not address whether the foreclosure action would have any effect on its proposed expansion.

Kuilima Resort Co. has been looking for a buyer or development partner for the project, which still needs final approval from the city Department of Planning and Permitting.

But Hokama's reassurance was good news to hotel employees' friends and relatives who have supported the expansion.

"Hopefully all these people will not be affected and they'll still have their jobs," said Kela Miller, a La'ie resident and supporter of the hotel's planned expansion. "That's the only thing I worry about."

Miller said she has relatives who were able get off welfare after both the husband and wife landed jobs at the hotel. She said she would support whatever the hotel had to do to keep her relatives employed.

Businessman Junior Ah-You said he understands that the hotel is separate from the developer and as long as the hotel is profitable, his friends and family that work there should be OK.

"I got a lot of friends and family that work there and I want security for their families," said Junior Ah-You. "... What they told me is it's self-sustaining. The hotel is making a profit.They're getting paid on time and there's no rumors of any layoff."

The suit, file in state court, stated that Credit Suisse made a $275 million mortgage loan to Kuilima Resort in September 2005. The resort failed to make a $685,500 principal and interest payment on June 29, according to the suit.

The company then failed to pay a $1 million "amendment fee" that was due at the end of July, Credit Suisse alleged. The amendment fees were imposed as a result of earlier missed payments, according to the lawsuit.

Credit Suisse claims that the principal balance owed is nearly $271 million, and an additional $10.4 million in interest and $2.3 million in amendment fees is outstanding.

Grassroots organizations have waged a campaign against further development at Turtle Bay since Kuilima Resort made its move to expand in 2005.

Gil Riviere, of Keep the North Shore Country, wondered where all the money was spent.

"If they can't make their loans how can they go ahead and proceed with their expansion?" Riviere said. "If there's no money, what are they doing?"

Mark Cunningham, co-chairman for the Defend Oahu Coalition, called the lawsuit a victory for the grassroots movement against the expansion. But it could also be a time to change the course of the future of the area, Cunningham said.

"My real hope is that this can lead to dialogue, which has been sorely lacking with Kuilima Resort Co., Oaktree Capital (owner of Kuilima Resort Co.) and the community as to what else can possibly be done with the land surrounding the existing resort," Cunningham said.

The coalition supports the present use but not an expansion, he said. The timing might be right to open talks about preservation.

"It's one of the last unobstructed barren coastlines on this island," Cunningham said. "I think for the visitor industry and the locals, maintaining this rural and country atmosphere is beneficial for everyone."

Reach Eloise Aguiar at eaguiar@honoluluadvertiser.com.

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