Midland Objects On Innkeepers’ Repayment Plan

by San Antonio Attorney

Midland Loan Services, the largest secured creditor of Innkeepers USA Trust, is opposed to the bankruptcy exit plan of the hotel operator saying that it would be against the federal rules for the company to get a payback out of the sales of its assets.

In court papers filed Wednesday, Midland said that funds coming into the estate must be used to pay the creditors first before Apollo Investment Corp.

The loan services company has lost about $100 million of its secured claims when 72 hotels of Innkeepers were sold at a price of over $1 billion.

The estate will get more or less $8 million which will either be given to its owner Apollo or be used as partial payment of claims lost by Midland.

The owners of the hotel operator said that Midland has waived its claims with regards to the selling of properties. But the creditor responded that its waiver does not include the guarantors and owners, only bankrupt entities.

Innkeepers, the operator and owner of more than 70 hotels including Hyatt, Hilton, and Marriott, filed for Chapter 11 bankruptcy protection in July 2010 because of large debts and difficulties in maintaining its properties.

The argument over who gets the profits from the sold properties will be tackled at a hearing on June 7. The court confirmation hearing on the restructuring plan is on June 23.

Innkeepers is now dealing with two objections of its plan which could prevent a court confirmation. The office of the U.S. Trustee is also taking issue over the sale plan which would release Apollo Investment Corp. from lenders claims against the company. Chatham Lodging Trust is going to buy five of Innkeepers’ properties for the price of $195 million.

Although the Innkeepers sale plan has been approved by the court, the creditors have not yet voted on it. The proposal includes selling a number of the company’s properties to investment firms Cerberus Capital Management and Chatham for over $1 billion.

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