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Cerberus in $1.1bn hotel deal

The New York investment firm has won an auction alongside partner Chatham Lodging Trust to acquire 64 hotels from Innkeepers USA Trust, which filed for Chapter 11 bankruptcy protection in 2010.

Cerberus Capital Management has triumphed in an auction for Innkeepers USA Trust hotels, buying 64 of the chain’s assets for $1.1 billion including debt.

Innkeepers and 91 of its subsidiaries opted to file for Chapter 11 bankruptcy protection in July 2010 because of its debt load reported at the time to $1.4 billion, which hindered its ability to maintain and upgrade properties. The company is a REIT that owns interests in 73 hotels with approximately 10,000 rooms in 19 US states.

This week’s auction of properties – some of which are operated as Hilton, Hyatt and Marriott hotels – began on Monday and ended early on Tuesday at the offices of law firm Kirkland & Ellis in New York.

Cerberus teamed up with Chatham Lodging Trust, a hotel REIT, to bid $400 million of equity and $700 million assumed debt, according to the Wall Street Journal.

The New York Post reported earlier this week that a strong underbidder for the properties was the bankrupt estate of Lehman Brothers and partner, Five Mile Capital, which had reportedly tabled a $970 million offer. Lehman’s estate owns some $325 million of loans in the hotel group and will receive around $220 million back following the sale, the newspaper said.

Innkeepers USA Trust was originally bought in 2007 for $1.5 billion in equity by Apollo Investment Corporation, the publicly traded business development company and an affiliate of private equity firm Apollo Management.

At the time of filing for bankruptcy protection, Apollo’s equity in the business was expected to be wiped out.