Innkeepers USA Trust won approval to extend control over its bankruptcy amid a dispute with Cerberus Capital Management LP and Chatham Lodging Trust (CLDT) over whether they will buy 64 of its hotels.
The new deadline to file a Chapter 11 plan will be Nov. 10 once a formal order is submitted, U.S. Bankruptcy Judge Shelley Chapman said today in Manhattan. Control over the case had been set to expire Oct. 1. Innkeepers scaled back a request to extend the date to Jan. 19, saying it would revisit the issue Nov. 9 if needed.
The operator of 71 hotels, including Residence Inns, Marriott hotels and Hampton Inns, received court approval of a plan in June, before Cerberus and Chatham sought to cancel their $1.1 billion purchase citing a change in market conditions or Innkeepers’ business. Innkeepers sued, saying there has been no such change since reaching the binding agreement May 16.
Cerberus and Chatham haven’t disclosed what the change is, Daniel Donovan, a lawyer for Palm Beach, Florida-based Innkeepers, told Chapman today. Innkeepers is still in the investigation stage of its lawsuit against the firms, he said.
Separately, Innkeepers said in court papers filed today that it amended a loan agreement for $17.5 million with Solar Finance Inc., an affiliate of Lehman Ali, to make the maturity date Sept. 19 rather than Sept. 12.
Innkeepers, whose parent is managed by an affiliate of Leon Black’s private-equity firm Apollo Global Management LLC, filed for bankruptcy in July 2010 with a pre-arranged reorganization plan proposed by Apollo and Lehman Ali, a unit of bankrupt Lehman Brothers Holdings Inc. Creditors rejected that plan.
Cerberus and Chatham later won an auction to acquire the 64 hotels after topping a $970.7 million offer from Lehman Ali and Five Mile Capital Partners. Innkeepers’ initial Chapter 11 petition listed assets of $1.5 billion against debt totaling $1.52 billion.
“We’ve been evaluating various paths forward and considering how litigation will interplay with the plan,” Brian Lennon, a lawyer for Innkeepers, told Chapman today. The company is considering a way for hotels that aren’t involved in the dispute to exit bankruptcy during the lawsuit, he said.
The material adverse change clause in Innkeepers’ agreement allowed Cerberus and Chatham to pull out of the deal for “any condition, change or development that could reasonably be expected to have a material adverse effect on the business, assets, liabilities or operations, condition or prospect” of Innkeepers.
Chatham, a Palm Beach-based hotel-investment company, owns properties under Hilton brands including DoubleTree and Hampton Inn, and Marriott brands including Courtyard and Residence Inn, according to its website. Cerberus, a private equity investor, is based in New York.
The case is In re Innkeepers USA Trust, 10-13800, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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