Innkeepers USA Trust files bankruptcy; Lehman ALI to get new stock

By Caroline Salls

Pittsburgh, July 19 - Innkeepers USA Trust filed for Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the Southern District of New York.

According to a statement filed by chief financial officer, treasurer and vice president Dennis Craven, Innkeepers USA has an "unmanageable debt load" that has hurt its ability to service funded debt obligations.

As a result, Craven said Innkeepers is in default on all 11 of its loan agreements.

Craven said the company has entered into a plan of reorganization support agreement with one of its key constituents, lender Lehman ALI Inc.

Restructuring terms

Under the proposed restructuring plan:

• Lehman will receive 100% of the new shares of common stock in the reorganized company in exchange for its $238 million floating-rate mortgage loan secured claim;

• The remaining secured lenders under Innkeepers' pre-bankruptcy credit facilities will receive new secured notes with a value that is no less than the value of the collateral securing their debt;

• Unsecured creditors, other than holders of deficiency claims, not paid under a first-day order will receive a share of a cash allocation; and

• Holders of existing common and preferred stock will receive no distribution.

In addition, Craven said the company entered into an agreement with franchisor Marriott International, Inc. under which Inkeepers agreed to provide assurance of the future completion of specified property improvement programs on 23 of its Marriott-branded hotels in compliance with franchise agreements.

As part of the assurance, the company has committed to obtain financing to complete the improvement programs within an aggressive time frame.

In exchange, Marriott has agreed to support the company's restructuring and not exercise "potentially significant rights" during the bankruptcy case.

DIP loans

In connection with the bankruptcy filing, Innkeepers requested court approval of two debtor-in-possession facilities for a total of $68.25 million in DIP financing to fund the improvement programs.

The first is a 360-day $17.5 million facility from Lehman ALI affiliate Solar Finance Inc.

The second DIP loan is a 360-day $50.75 million facility from Five Mile Capital II Pooling International LLC.

Interest on both DIP facilities will be Libor plus 500 basis points with a 2% Libor floor.

According to court documents, Innkeepers USA Trust has more than $1 billion in assets and $1.6 billion in debt, including $1.29 billion of secured debt.

The company did not list its largest unsecured creditors.

Innkeepers is a Palm Beach, Fla., hotel real estate investment trust. The Chapter 11 case number is 10-13800.

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