Innkeepers USA Trust denied request to assume plan support agreement

By Caroline Salls

Pittsburgh, Sept. 2 - Innkeepers USA Trust's motion to assume its plan of reorganization support agreement with lender Lehman ALI, Inc. was denied Thursday by the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Lehman ALI is scheduled to receive 100% of the new shares of common stock in the reorganized company under Innkeepers' plan in exchange for its $238 million floating-rate mortgage loan secured claim.

On Wednesday, party in interest Appaloosa Investment LP I objected to Innkeepers' assumption of the plan support agreement, arguing that the agreement with Lehman has "spurred extensive discovery requests and a motion for an examiner."

"Unlike most plan support agreements, the PSA doesn't lock up a critical mass of creditors," Appaloosa said in the objection. "Here, the debtors have signed up only one of the creditors needed to complete a comprehensive restructuring."

Appaloosa said Lehman ALI's brand of support risks the loss of the lender's cash collateral, "an unconscionable hammer held over the heads of all parties in interest in these cases."

"[The support agreement] prohibits the debtors from negotiating with the numerous constituents who will be required to vote on their respective debtor's Chapter 11 plan and requires the debtors to shelve their fiduciary duties," Appaloosa said.

"Absent the PSA, virtually nothing prevents the debtors, Lehman and Apollo from filing their exact same plan on the exact same timetable."

The company did receive final court approval of a $53 million debtor-in-possession credit facility from Five Mile Capital II Pooling International Inc., as well as court approval to use cash collateral to fund its operations while in bankruptcy.

The DIP facility will mature in 360 days.

Interest will be Libor plus 500 basis points with a 2% Libor floor.

The company also received court approval of a $17.5 million DIP loan from Lehman ALI affiliate Solar Finance, Inc. on Wednesday.

Innkeepers USA, a Palm Beach, Fla., hotel real estate investment trust, filed for bankruptcy on July 19. The Chapter 11 case number is 10-13800.

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