NEW YORK ― Innkeepers USA Trust will try to persuade a judge to force would-be buyers to proceed with their planned $1.12 billion acquisition of some of its hotels as a trial begins on Monday in a U.S. bankruptcy court.
Innkeepers, the bankrupt operator of 72 hotels under Hilton, Marriott and other brands, sued Cerberus Capital ManagementChatham Lodging Trust in August. Earlier that month, Cerberus and Chatham backed out of a joint venture agreement to buy 64 of Innkeepers’ properties.
U.S. Bankruptcy Judge Shelley Chapman in Manhattan agreed to start the three-day trial on Monday even though the court is mostly closed for the Columbus Day holiday.
Innkeepers had pushed for a quick trial as it hopes to get back on its feet in time to maximize its sale value and pay back its creditors.
Cerberus and Chatham invoked a “material adverse event” clause in the sale deal that allowed them to walk away if something happened that could materially alter Innkeepers’ business.
In pretrial court filings, Innkeepers said no such event had taken place.
“Innkeepers is stable and … Innkeepers’ hotels have performed at or near budget,” the company said. “These hotels’ brightest days are ahead of them.”
Cerberus and Chatham argued in court documents that the purchase agreement allowed them to terminate the deal for any event likely to damage Innkeepers’ business in the future.
In pretrial court documents outlining why the deal collapsed, the firms cited analysts’ downgrades in the lodging sector, weakening hotel asset sales, and 30 percent to 40 percent declines in competing hotel operators’ shares.
Innkeepers said its buyers used the material adverse event clause as an excuse to try to renegotiate the sale price.
The hotel operator filed for bankruptcy protection in July 2010, saying its debt load had made it too difficult to keep up its properties.