Innkeepers USA Trust filed for Chapter 11 bankruptcy protection Monday, outlining a plan that would give one of the extended-stay hotel operator's major creditors substantially all of the equity in the company.
The real estate investment trust listed more than $1 billion in assets and liabilities, according to documents filed with the U.S. Bankruptcy Court in the Southern District of New York.
The company owns 72 hotels in 19 states and the District of Columbia.
Under the terms of Innkeepers' proposed reorganization plan, $238 million senior loans held by Lehman ALI Inc., a unit of Lehman Brothers Holdings Inc., would be converted to equity.
That would give Lehman, which remains in bankruptcy since it collapsed in September 2008, another potential asset in its campaign to pay off its own creditors.
Innkeepers' plan calls for remaining secured creditors to receive new secured mortgage notes worth no less than the value of the properties being used as collateral.
Terms of the reorganization plan and the Lehman debt-for-equity swap must be approved by bankruptcy court judges overseeing Innkeepers' and Lehman Brothers' cases.
If approved, the proposed plan would reduce the hotel operator's debt and enable it to retain all of its hotel properties, the Palm Beach, Fla., company said.
"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, Innkeepers' chief restructuring officer. "We and our third party managers will continue to operate our hotels and serve our guests in the ordinary course."
Innkeepers said it received commitments for about $67 million in debtor-in-posession financing, most of which the company will use to invest in so-called property improvement programs on certain of its hotels.
The company also got a helping hand from Marriott International Inc., which holds franchise agreements with 44 Innkeepers hotels.
Marriott agreed not to terminate its franchise agreements with Innkeepers, letting it continue operating the properties with the Marriott brand.
Source: AP News
