Innkeepers Judge Says She Will Approve Bankruptcy Reorganization, Sale

Innkeepers USA Trust will win approval for a plan to exit bankruptcy that includes a sale of 64 of the company’s hotels to Cerberus Capital Management LP and Chatham Lodging Trust (CLDT), a judge said.

U.S. Bankruptcy Judge Shelley Chapman in Manhattan yesterday said she intended to sign an order approving the hotel company’s restructuring plan once she reviews final documentation.

The deal returns Chatham Chief Executive Officer Jeffrey Fisher to Innkeepers, which he founded in 1994 with seven hotels, he said in an interview today. The company was acquired by Apollo Investment Corp. (AINV) in 2007.

“When you know your assets, as long you know the pricing you think is right, it’s better than buying the unknown isn’t it?” Fisher said.

Innkeepers owns 71 hotels in 20 U.S. states, including Residence Inns by Marriott and Hampton Inns. Lehman Ali, a unit of Lehman Brothers Holdings Inc. (LEHMQ), helped finance the buyout of Innkeepers with a $1.2 billion loan. The company’s bankruptcy petition listed assets of $1.5 billion against debt totaling $1.52 billion.

At an auction in May, Cerberus and Chatham placed a winning bid of $1.1 billion for the largest group of hotels, topping an offer from Lehman Ali and Five Mile Capital Partners. Chatham, a real estate investment trust based in Palm Beach, Florida, has 10 percent of the joint venture formed with Cerberus, Fisher said.

In addition to the 64 hotels, Chatham won another group of five hotels with a bid of $195 million. Two other hotels will be turned over to lenders, according to court papers. Most of Innkeepers’ hotel portfolio is made up of extended-stay hotels, according to court papers.

Fisher said Chatham was drawn to the Innkeepers properties because they are in strong markets: the Northeast, the mid- Atlantic and California. As the economic recovery proceeds, the values of the hotels will rise, Fisher said.

“The Innkeepers deal just looked great to us, and in fact we think is going to add a lot of value over time,” he said.

Midland Loan Services, the special servicer of an $825 million mortgage loan, and Lehman filed objections to Innkeepers’ bankruptcy plan. Anup Sathy, an Innkeepers lawyer, said at yesterday’s court hearing they would withdraw their objections under an agreement announced in court. All except one objection to the plan was resolved, he told Chapman.

Chapman said she appreciated the work of lawyers in the case to achieve “truly global peace.”

The case is In re Innkeepers USA Trust, 10-13800, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tiffany Kary in New York at tkary@bloomberg.net; David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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