Innkeepers USA Trust, a real-estate investment trust that owns more than 70 midmarket hotels, is preparing to file for Chapter 11 bankruptcy protection, according to reports
Innkeepers may file for bankruptcy today. The hotel company, labouring under more than $1 billion in debt, holds interests in 73 extended-stay hotels and other properties operated under brands such as Hampton Inns, Courtyard by Marriott and Embassy Suites. The hotels are spread across 19 states and Washington, D.C.
Innkeepers, based in Palm Beach, Fla., took on hundreds of millions in debt in a $1.5 billion buyout by Apollo Investment Corp. Apollo Investment—which receives advisory services from an affiliate of private-equity giant Apollo Global Management—purchased the hotel company around the top of the market in 2007.
Innkeepers has been in trouble for a number of months, working with law firm Kirkland & Ellis and investment bank Moelis & Co. to help restructure its balance sheet. In April, Innkeepers said it missed interest payments on its debt and brought restructuring advisers aboard.
Innkeepers also ran afoul of Marriott International Inc., which manages and licenses its brands to several Innkeepers hotels. Marriott was prepared this year to pull its brands from several Innkeepers hotels because Innkeepers allegedly failed to keep the properties up to Marriott’s standards, known as property improvement plans.
Innkeepers filing comes amid a wave of restructurings in the commercial-real estate market, much of it stemming from $60 billion in hotel buyouts a few years ago that saddled companies with mountains of debt.
Extended Stay Inc., the 680-property hotel chain purchased for $8 billion, filed for bankruptcy last June. Red Roof Inn Inc., a chain of 340 hotels, has been trying to rework some $1.2 billion in debt taken on in a 2007 buyout. Blackstone Group LP recently finalized a deal to erase $4 billion of the $20 billion in debt on the books of Hilton Worldwide, one of its private-equity holdings.
