Innkeepers USA Trust won permission to auction its bankrupt hotels

Innkeepers USA Trust won permission to auction its bankrupt hotels under a revised deal with Lehman Ali Inc. and Five Mile Capital Partners LLC that values the properties at $970.7 million.

U.S. Bankruptcy Judge Shelley Chapman in New York today approved the so-called stalking-horse offer from the unit of Lehman Brothers Holdings Inc. (LEHMQ); Connecticut-based asset manager Five Mile; Midland Loan Services, a division of PNC Bank; and Apollo Investment Corp. Such offers serve as a baseline agreement to be challenged by competing bidders at an auction.

Chapman overruled objections from creditor Appaloosa Investment LP, which said a deal calling for Lehman to get $200.3 million in cash to cover its claims is improper, and “creates an unsupportable hurdle to competitive bidding.”

“Far from being chilled, the bidding appears to be quite heated,” Chapman said, praising Innkeepers for marketing itself so well in bankruptcy that competitive offers to be a stalking horse were received as late as last night.

The revised offer, announced March 7, separates seven hotels from the sale. Innkeepers will continue to market those hotels, seeking to raise more money for creditors.