Innkeepers Judge Approves Reorganization Terms, Sales to Cerberus, Chatham
Innkeepers USA Trust won approval of the revised terms of a reorganization plan that includes a sale of 64 hotels to Cerberus Capital Management LP and Chatham Lodging Trust. (CLDT)
U.S. Bankruptcy Judge Shelley Chapman in Manhattan court today approved the so-called ‘disclosure statement’ that details how assets will go to creditors. A hearing, initially set for May 10, had been adjourned to today, while creditors negotiated. A hearing to seek final confirmation of the plan is set for June 23, according to court papers.
“I believe you have an agreement to disagree with respect to the guarantee clams,” Chapman said.
Innkeepers creditor Midland Loan Services, a division of PNC Bank, had objected to the plan, saying it stripped Midland of a guarantee claim it has against Innkeepers unit Grand Prix Holdings LLC, and wrongly distributes millions to Apollo Investment Corp. Lehman Ali, a unit of Lehman Brothers Holdings Inc., had also said Apollo, which had junior equity interest, shouldn’t get a recovery before senior creditors had been paid in full.
Anup Sathy, a lawyer for Innkeepers, said the plan was modified to allow for creditors to dispute that issue later. He also said Innkeepers had provided for $4 million to be set aside for management compensation.
Breakup Fee
Separately, Chapman approved an agreement that would pay Chatham a $2 million breakup fee and $500,000 expense reimbursement related to a separate bid it made for other Innkeepers properties.
Innkeepers filed multiple Chapter 11 plans to resolve claims against 92 units in bankruptcy. At a May 3 auction, Cerberus and Chatham placed a winning bid of $1.12 billion for the largest group of hotels, topping a $970.7 million offer from Lehman Ali and Five Mile Capital Partners.
Innkeepers, based in Palm Beach, Florida, has 71 extended- stay and limited-service properties with 10,000 rooms in 20 states. The company still requires a creditor vote on its plan and final confirmation from the court.
Chatham, a Palm Beach-based hotel investment company, won another group of five hotels, the LNR properties, with a bid of $195 million. Two other hotels would be turned over to their lenders.
Biggest Plan
Under the biggest of the plans, covering the 64 hotels sold to Cerberus and Chatham, secured creditors would be repaid in full. Sathy said that under changes agreed to just before today’s hearing, the Midland fixed loan mortgage will get a debt instrument of $723.8 million, and cash of $12.8 million. The floating rate mortgage will get a cash payment of about $233 million, and the floating rate mezzanine loan will get a cash payment of about $2.6 million. The total equity is $400.5 million, Sathy said.
Midland, a creditor and servicer of $825 million of fixed- rate mortgage debt, will agree not to pursue lawsuits against Apollo Investment Corp. (AINV), which acquired Innkeepers in July 2007 in a $1.35 billion transaction, according to the plan. In return for a release, Innkeepers will pay Midland $3 million.
Midland had sued Apollo, and the bankruptcy court had left open the possibility for a breach-of-contract claim, according to court papers.
The Hilton Suites hotel in Anaheim, California, will be turned over to Lehman Brothers, which controls the mezzanine debt. The special servicer for the mortgage on the Hilton in Ontario, California, C-III, will take over the property and pay cash for what the disclosure statement calls a “small percentage recovery” for unsecured creditors.
Innkeepers filed for Chapter 11 in July, listing assets of $1.5 billion against debt totaling $1.52 billion.
The case is In re Innkeepers USA Trust, 10-13800, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.
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