Cerberus Kills Innkeepers Deal in Sign of Strain for Buyouts

Cerberus Capital Management LP and Chatham Lodging Trust terminated their $1.1 billion agreement to buy 64 hotels from Innkeepers USA Trust, a sign that the weakening economy is straining the private-equity market.

The firms in a statement today cited a possible adverse change in Palm Beach, Florida-based Innkeeper’s business as the reason for backing out of the June transaction, a key element in the lodging company’s plan to exit bankruptcy. Cerberus and Chatham didn’t specify what triggered the decision to invoke what is known as a material adverse effect clause. Innkeepers said the companies acted “inappropriately,” and it will evaluate “all legal and equitable remedies.”