NEW YORK ― Cerberus Capital Management LP and Chatham Lodging Trust terminated their agreement to buy 64 hotels from Innkeepers USA Trust for $1.1 billion, citing a possible adverse change in the business.
The firms agreed to the transaction in June as part of Innkeeper’s bankruptcy reorganization. At an auction in May, they placed the winning bid for the largest group of Innkeepers’ hotels, topping an offer from a unit of Lehman Brothers Holdings Inc. and Five Mile Capital Partners LLC.
Cerberus, based in New York, and Chatham of Palm Beach, Fla., invoked what is known as a material adverse effect clause in their purchase agreement, they said today in a statement. The clause allows them to back out of the deal in the occurrence of a “condition, change or development that could reasonably be expected to have a material adverse effect” on conditions including Innkeepers’ business and financial position, according to the statement.
The announcement disrupts Innkeepers’ exit from Chapter 11 after a judge previously signed off on a plan that has creditors’ approval. Officials for Cerberus, Chatham and Innkeepers couldn’t immediately be reached for comment.
Innkeepers owns 71 hotels in 20 U.S. states and the District of Columbia, including Residence Inns by Marriott and Hampton Inns, according to a July 19 statement. On July 14, Chatham completed the acquisition of five hotels comprising 764 rooms from Innkeepers for $195 million in cash, a deal that isn’t affected by today’s decision.