TPG Capital Is Said to Be Bidder for Innkeepers USA in Bankruptcy Auction
Innkeepers USA Trust, bankrupt owner of 72 hotels, will have an auction with undisclosed bidders after a court hearing at which representatives for Cerberus Capital Management LP and TPG Capital LP made an appearance by telephone.
“There has been a tremendous amount of activity and we’re looking forward to an auction,” on May 2, Brian Lennon, a lawyer for the bankrupt hotel owner, told U.S. Bankruptcy Judge Shelley Chapman in Manhattan at the hearing today. He declined to comment in an interview after the hearing on how many bids had been received or the identities of the bidding parties.
Innkeepers has approval of a $970.7 million offer from Lehman Ali Inc. and Five Mile Capital Partners LLC, which will compete at the auction with any other qualifying bids received by April 25. TPG Capital, the private equity firm, will be one of the bidders for the assets, according to a person familiar with the matter.
Bids, which are scheduled to be heard at the offices of Innkeeper’s counsel Kirkland & Ellis LLP, may be for all or parts of the hotel owner’s assets. The final stalking horse offer separated seven hotels from the sale, and covers 45 properties with $825 million in fixed-rate mortgages serviced by Midland Loan Services Inc, and 20 properties with a $238 million floating-rate mortgage held by Lehman Ali.
‘Apples to Oranges’
In addition to Cerberus, law firm Ropes & Gray LLP and C- III Asset Management, a servicer to some of Innkeeper’s debt, participated in today’s court hearing by phone.
“The auction could last a while, depending on whether they have to compare apples to oranges,” said David Neff, a lawyer for C-III.
Neff said he wasn’t aware of the qualifying bidders but said it was “interesting” that Cerberus had made an appearance in the court call. Ropes & Gray lawyer Mark Bane declined to comment.
Cerberus spokesman John Dillard declined to comment. A person involved in the situation said Ropes & Gray represents TPG Capital. Owen Blicksilver, a spokesman for San Francisco- based TPG Capital, declined immediate comment.
The so-called stalking-horse offer from Lehman Ali, a unit of Lehman Brothers Holdings Inc. (LEHMQ); Connecticut-based asset manager Five Mile; and Midland Loan Services, a division of PNC Bank, also includes Apollo Investment Corp. Such offers serve as a baseline agreement to be challenged by competing bidders at an auction.
Bidding to become the stalking horse offer was also competitive, as a revised offer approved by Chapman March 11 was sweetened to remove a $7 million breakup fee that would have compensated the stalking horse if a higher offer was received.
According to court papers, “Bidder D” has submitted competitive bids for Innkeepers and will be reimbursed for its expenses.
In approving that offer, Chapman overruled objections from creditor Appaloosa Investment LP, which said a deal calling for Lehman to get $200.3 million in cash to cover its claims is improper, and “creates an unsupportable hurdle to competitive bidding.”
The stalking horse agreement calls for unsecured creditors to get a distribution as high as 65 percent of their claims. An $8 million overbid, or total offer of $978.7 million, is required to top the Lehman and Five Mile agreement, according to court papers.
The parent of Innkeepers, owner of hotels in 20 states, including Residence Inns by Marriott and Hampton Inns, is managed by an affiliate of Apollo Global Management LLC, Leon Black’s private-equity firm.
Lehman Ali helped Apollo finance the buyout of the Palm Beach, Florida-based Innkeepers with a $1.2 billion loan.
To contact the reporter on this story: Tiffany Kary in New York at firstname.lastname@example.org.
To contact the editor responsible for this story: John Pickering at email@example.com.