Judge Approves, 'Directs' Innkeepers Sale Completion

Hotel owner Innkeepers USA Trust received approval from the bankruptcy judge in New York on Oct. 21 to sell 64 hotels for $1.02 billion to Cerberus Capital Management LP and Chatham Lodging Trust.

The sale represents a 9 percent price reduction from the contract the bankruptcy judge approved when she confirmed Innkeepers' Chapter 11 plan in June.

The reduced price resulted from negotiation conducted in the face of a lawsuit scheduled for trial earlier this month where Innkeepers was asking the court to compel the buyers to carry out the original contract. Cerberus and Chatham argued in response that they were entitled to cancel the original deal in view of a material adverse change in the hospitality industry.

Approval of the new contract also made changes in the previously confirmed plan. No voting was required because the only affected parties consented to the price reduction.

To ensure that the new contract goes through on schedule, the court's approval order "directed" each of the parties "to use its best efforts to consummate the transactions" in a "timely manner."

Innkeepers expects the sale to be completed late this week, Chief Restructuring Officer Marc A. Beilinson said in an e- mailed statement.

For a rundown on the revised sale and its effect on the principal creditors, click here for the Oct. 20 Bloomberg bankruptcy report. The affected creditors were Midland Loan Services, the servicer for $825 million of fixed-rate mortgages on 45 hotels, and Lehman Ali Inc., a non-bankrupt subsidiary of Lehman Brothers Holdings Inc. with $238 million in floating-rate mortgages on 20 of the Innkeepers properties.

For details on the original plan, click here for the June 24 Bloomberg bankruptcy report.

Apollo Investment Corp. acquired Palm Beach, Florida-based Innkeepers in July 2007 in a $1.35 billion transaction. It had 72 extended-stay and limited-service properties with 10,000 rooms in 20 states.

The Chapter 11 petition filed in July 2010 listed assets of $1.5 billion against debt totaling $1.52 billion.

The lawsuit against Cerberus is Innkeepers USA Trust v. Cerberus Four Holdings LLC (In re Innkeepers USA Trust), 11-02557, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The Chapter 11 case is In re Innkeepers USA Trust, 10-13800, in the same court.