UPDATE 2-Windstar Cruises parent files bankruptcy, plans sale

Fri Apr 1, 2011 5:32pm EDT

* Ambassadors International files Chapter 11 in Delaware

* NY fund Whippoorwill agrees to buy company

* Windstar operates three luxury yachts

* Cruises to operate as scheduled during bankruptcy (Adds details of sale process, company statement, byline)

By Jonathan Stempel

NEW YORK, April 1 (Reuters) - Ambassadors International Inc AMIE.O, the parent of Windstar Cruises, filed for bankruptcy protection on Friday and said it plans to sell itself to Whippoorwill Associates Inc, its largest shareholder.

Windstar operates three internationally flagged luxury yachts with sailings in the Americas including the Caribbean, and Europe including the Baltic region and the Greek Isles, according to the Chapter 11 petition filed with the U.S. bankruptcy court in Delaware.

The cruise industry has struggled as the recent economic recession caused many consumers to curb discretionary spending, including on travel.

Based in Seattle, Ambassadors said Windstar will operate its cruises as scheduled during the bankruptcy process, expected to take 45 days.

Court approval is required for a sale, which also includes assets from Ambassadors' former Majestic America Line. Those operations shut down in 2008.

Whippoorwill is a White Plains, New York-based hedge fund led by Shelley Greenhaus. It invests in bankrupt and distressed companies, and manages more than $1 billion.

According to the petition, Whippoorwill owns 22.2 percent of Ambassadors' common stock. It plans to provide $10 million of financing to help the company operate during the bankruptcy process.

Friday's filing covers Ambassadors and 11 affiliates. The company had $86.4 million of assets and $87.3 million of debts as of Dec. 1, 2010, the filing shows.

The Nasdaq halted trading in Ambassadors' shares on Friday morning for news pending. The shares closed Thursday at $2.80.

The case is In re: Ambassadors International Inc, U.S. Bankruptcy Court, District of Delaware, No. 11-11002. (Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)