MAC upgrade

14 October 2011 By Reynolds Holding

After crying “material adverse change,” buyout firm Cerberus is close to landing Innkeepers for less than first agreed. The broad MAC in this bankruptcy deal may not reflect market reality. But sellers still have work to do ensuring buyers know the price of trying to walk.

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Cerberus Capital Management and Chatham Lodging Trust tentatively agreed on Oct. 13 to buy bankrupt Innkeepers USA Trust for about $1 billion, reduced from the $1.12 billion that the two firms had agreed to pay in May. The deal is for 64 of the hotelier’s properties.
The initial deal fell apart after Cerberus and Chatham claimed that a material adverse event had occurred and, under the terms of the proposed deal, justified their backing out. They said the lodging business and hotel sales had weakened substantially because of the sputtering economy and reeling markets. Innkeepers sued to force completion of the transaction. The repeatedly postponed trial is now scheduled for Oct. 20, unless a final settlement is reached beforehand.

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