26 July 2010

Innkeepers USA files for Chapter 11

South Florida Biz Journal

Innkeepers USA Trust has filed a prearranged bankruptcy petition in New York that would essentially give one of its largest lenders all of the equity in the reorganized company.

The Palm Beach-based real estate investment trust and owner of upscale extended-stay hotel properties throughout the U.S. owes creditors more than $1 billion, according to the petition, filed Monday.

In filing the bankruptcy petition, the company said it reached various agreements with some of its key constituents involving the company’s financial restructuring through a prearranged plan of reorganization.

The agreements allow Innkeepers to maintain its portfolio of hotel properties. It also would allow Lehman ALI, one of its largest prepetition secured lenders, to convert its secured claims to substantially all of the equity in the reorganized company.

In addition, Marriott International, one of Innkeepers’ significant franchisors, has agreed to maintain its franchise agreements, subject to Innkeepers’ ability to upgrade some of its hotels, according to a news release.

Innkeepers USA Trust is owned by Apollo Investment Corp., which purchased it in April 2007 for $1.5 billion at the height of the real estate boom.

In April, Innkeepers said it stopped making monthly interest payments on $825.4 million in loans covering 73 hotels. The company's Florida hotels include the Best Western West Palm Beach, the Courtyard Fort Lauderdale, the Four Points by Sheraton Destin-Fort Walton Beach, Hampton Inn Naples and Residence Inn by Marriott Altamonte Springs.

Innkeepers obtained commitments for two debtor-in-possession credit facilities totaling about $67 million, which the company will invest in the improvement of its hotel portfolio.

“Our company is entering into this last phase of its ongoing restructuring process in order to return to a position of financial and operational strength,” said Marc Beilinson, the company’s chief restructuring officer, in a news release.“ We are generating positive operational cash flows and, along with our two DIP financing agreements, we have the resources to meet our ongoing financial needs. We and our third-party managers will continue to operate our hotels and serve our guests in the ordinary course.”

The company said that as a result of the agreements it expects to emerge from bankruptcy quickly.

“We are confident we will emerge from this process as a stronger, more competitive business with a rationalized financial structure and clearly enhanced fundamentals,” Beilinson said.

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