Investment firms Cerberus Capital Management and Chatham Lodging Trust won a bankruptcy auction on Tuesday to acquire 64 hotels from Innkeepers USA Trust for $1.1 billion, including debt.
Innkeepers is a Palm Beach, Fla.-based real estate investment trust that became one of the largest corporate bankruptcies in 2010 when it entered Chapter 11 proceedings last July. The company owns more than 70 hotels in 20 states but was hit hard by the real estate downturn. Innkeepers owed creditors more than $1 billion at the time of its bankruptcy filing, much of it tied to a $1.5 billion leveraged buyout by Leon Black's Apollo Investment Corporation in 2007.
The Wall Street Journal reports that the marathon auction for Innkeepers's hotel assets was held at the offices of Kirkland & Ellis in New York. Auction proceedings began around 10 a.m. in New York on Monday and continued into the early morning hours on Tuesday.
The winning bid by Cerberus, a private equity firm, and Chatham, a REIT, will see the joint venture acquire 45 hotels operating under the Marriott, Hilton, and Hyatt brands that are attached to a mortgage serviced by Midland Loan Services, according to The WSJ, which reports that another 19 hotels have a mortgage held by a subsidiary of Lehman Brothers.
Schulte Roth & Zabel business transactions partner Stuart Freedman and special counsel Kimberly Monroe, tax partners Alan Waldenberg and Dominique Padilla Gallego, restructuring partner Adam Harris, real estate special counsel Fonda Duvanel, and associates Joseph Bain and Audra Dowless are advising New York-based Cerberus on the deal. Cerberus is a long-time client of the firm, having recently tapped Schulte for its $6.3 billion sale of Chrysler Financial to Toronto-Dominion Bank in December.
Palm Beach-based Chatham turned to Wachtell, Lipton, Rosen & Katz restructuring partner Scott Charles, real estate and REIT M&A cohead Robin Panovka, corporate associate Scott Golenbock, restructuring associate Caith Kushner, and real estate associate David Fischman. Chatham, whose chairman and CEO Jeffrey Fisher once ran Innkeepers, also won a second auction by paying $195 million for five additional hotels that Innkeepers was selling separately, Bloomberg reports.
"The outcome of the auction represents a tremendous success for the company and its stakeholders," said a statement by Innkeepers chief restructuring officer Marc Beilinson, a turnaround professional and former partner at bankruptcy boutique Pachulski Stang Ziehl & Jones. "We look forward to closing these transactions and emerging from Chapter 11."
Court records show that Kirkland, which is serving as bankruptcy counsel to Innkeepers, has racked up more than $11.3 million in fees and expenses for its representation of the debtor since the start of its Chapter 11 case. Kirkland restructuring partners James Sprayregen, Paul Basta, Anup Sathy, Marc Carmel, Brian Lennon, and Stephen Hessler, and litigation partners Daniel Donovan and Patrick Bryan are leading a team from the firm advising Innkeepers during its Chapter 11 proceedings.
Morrison & Foerster bankruptcy partners Brett Miller, Lorenzo Marinuzzi, Jordan Wishnew, and Stefan Engelhardt are representing the official committee of unsecured creditors in the Innkeepers bankruptcy. Court records show that the firm has billed for more than $2 million in fees and expenses from July 28 of last year through February 28.
A hearing on Innkeepers's restructuring plan is scheduled for May 10 and the debtor expects to have a hearing confirming its reorganization on June 23.
