* Trial begins Monday over failed $1.12 billion sale deal
* Trial expected to last three days
* Innkeepers looking to force sale to proceed
By Nick Brown
NEW YORK, Oct 10 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.
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'
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
The case is Innkeepers USA Trust et al v. Cerberus Series
Four Holdings LLC et al, U.S. Bankruptcy Court, Southern
District of New York, No. 11-2557.
The Innkeepers bankruptcy is In re Innkeepers USA Trust, in
the same court, No. 10-13800.