Montecito hotel magnate Pat Nesbitt could lose as many as half of his Embassy Suites properties under a recently approved bankruptcy reorganization plan.

Nesbitt and his company, Windsor Capital Group, parked a portfolio of eight Embassy Suites hotels in Chapter 11 bankruptcy, listing more than $100 million in debts, after being unable to work out a deal with his servicer, New York-based Torchlight Investors. Nesbitt’s Embassy Suites properties in Lompoc and San Luis Obispo were not involved in the case.

Court documents filed in U.S. Bankruptcy Court in Santa Barbara indicate the eight hotels in the bankruptcy are now slated to go to the auction block. Nesbitt did not return repeated requests for comment. Torchlight declined to comment.

Nesbitt is one of the largest private owners of Embassy Suites Hotels in North America, according to the bankruptcy documents, and they form the core of his hospitality empire. Through Windsor, he manages 21 hotels around the country. Seventeen of those hotels are Embassy Suites, and sixteen of them are owned by Nesbitt, according to the bankruptcy documents. One of the properties in El Paso, Texas has lost its Embassy Suites franchise.

Nesbitt refinanced the hotels in 2006 with a $187.5 million loan. But when the loan came due, Nesbitt was facing pressure from two sides. On one hand, the Great Recession had cut down operating income from $22 million in 2006 to $13 million in 2009. On the other, the hotels were coming up for franchise renewal with Embassy Suites, and one of the conditions of approval were renovations that would have cost about $50 million, Nesbitt said in earlier court filings.

Nesbitt was ultimately unable to reach a deal with the lender when the loan matured in February 2011. He found himself in much the same spot as an underwater homeowner: His loan had been sliced and diced so many ways that there was no single lender with a human face to negotiate with, according to a Business Times analysis of court filings.

Nesbitt’s firm borrowed the money from Greenwich Capital Financial Products, part of the Royal Bank of Scotland. But the funding itself came from a $3.6 billion loan securitization underwritten by RBS, Goldman Sachs, Merrill Lynch, Morgan Stanley and others. In the end, the technical lenders who have a claim on Nesbitt’s properties are the registered holders of “GS Mortgage Securities Corp. II, Commercial Mortgage Pass-Through Certifications, Series 2006-GG-6.”

Because the securities were sold on the open market, it’s impossible to tell where exactly they landed or who now holds them. Indeed, the way the money was supposed to flow under Nesbitt’s loans was this: All revenue from the hotels went into special accounts, and then Torchlight, the “special servicer,” was tasked with giving some money back to the hotels for operation and forwarding on the rest for debt service and fees. U.S. Bank is the administrative trustee for the mortgage certificates, meaning that it would receive the debt service money and then route it to individual holders.

Nesbitt technically could secure financing and attempt to repurchase his hotels. However, the lender is allowed to make a “credit bid” for the properties, offsetting the remaining debt against the proposed purchase price.

Grant Lyon of Odyssey Capital Group in Phoenix has been appointed chief restructuring officer in the case and will oversee the sale. The brokers will be either Eastdill Secured, Jones Lane LaSalle or HFF.