Creditors pan Innkeepers' bankruptcy exit plan
Innkeepers USA Trust's
Seven parties have lodged objections in U.S. Bankruptcy Court in Manhattan, five on Friday, including One East Capital Advisors LP and York Credit Opportunities Fund LP, preferred shareholders that stand to recover no more than 6 percent on claims against the insolvent hotel manager.
One key point of contention is whether creditors will be able to pursue claims against third parties, including Innkeepers owner Apollo Investment Corp
Innkeepers, which owns and operates hotels under brand names that include Hilton, Hyatt and Marriott, filed for bankruptcy in July 2010, saying its debt, including $1.29 billion in secured debt, made it too difficult to keep up its properties.
The bulk of its 72 hotels were auctioned to Chatham Lodging Trust
The sale plan has been approved by U.S. Bankruptcy Judge Shelley Chapman in Manhattan, but must be green-lighted by creditors at a confirmation hearing on Thursday.
FRIDAY DEADLINE
Friday was the deadline for parties to object to confirmation of the plan.
One East, part of the so-called Preferred C shareholder group due to recover between 0 and 6 percent on claims, said it should be able to pursue action against Apollo. It said Apollo played a direct role in reducing the value of its claims by consummating an unsuccessful leveraged buyout of Innkeepers.
In exchange for an uncertain, small distribution, the Preferred C interests are required to grant overly broad releases to numerous parties, One East said.
The U.S. Trustee's office has taken similar issue with Innkeepers' plan, saying earlier in June that Apollo should not be released from creditor claims.
LNR Partners LLC, servicer of about $161 million in claims asserted against Innkeepers by banks, also objected over future claims, saying on Wednesday that the plan would bar it from pursuing a lawsuit against units of Five Mile Capital Partners LLC.
LNR has accused the Five Mile units of breaching an agreement to appoint it as servicer for about $825 million in Innkeepers' fixed-rate mortgages.
PNC Financial Services Group Inc
unit Midland Loan Services, the current servicer of the mortgages, joined the cast of objectors, saying the plan could violate payment priority rules by channeling money back to Innkeepers before fully paying creditors.
Representatives for Midland, LNR and One East declined to comment on Friday.
York, another Preferred C shareholder, took issue with a $3.5 million administrative payment reserved under the plan for an ad hoc creditors' group, saying administrative payment is not allowed under bankruptcy code and should go instead to Preferred C shareholders.
Lehman Ali Inc, a non-bankrupt unit of Lehman Brothers Holdings Inc
AFFILIATES OBJECT
Rounding out Friday's filings was an objection from several insurer affiliates of Chartis Inc, who said the sale could strip them of their right to arbitrate disputes and enforce insurance policies, among other things.
Representatives for Chartis and York did not respond to requests for comment. A Lehman spokeswoman declined comment. Representatives for Innkeepers could not be reached on Friday.
Thursday's hearing, due to begin at 10 a.m. EDT before Judge Chapman, is the creditors' chance to give an affirmative yea or nay on the plan. If approved, it would set the stage for Innkeepers to emerge from bankruptcy protection.
The unsecured creditors' committee filed a statement on Friday supporting confirmation of the plan.
The case is In re Innkeepers USA Trust, U.S. Bankruptcy Court, Southern District of New York, No. 10-13800.
(Editing by Howard Goller; editing by Andre Grenon)
© Copyright Thomson Reuters 2024. All rights reserved.