Five Mile submitted a preliminary nonbinding offer for Innkeepers earlier this week to acquire its 64 remaining hotels, the people said. The offer is slightly higher than an opening bid Five Mile and Lehman made for Innkeepers in a May bankruptcy-court auction. Since then, the two sides have been negotiating terms. The deal consists mostly of assumed debt and converting debt to equity, the people said.
Under the broad contours of the proposed deal, Five Mile would assume a substantial portion of Innkeepers's senior mortgage debt and, along with investment partners, make certain cash payments to creditors.
Those investment partners are Starwood Capital Group and Hersha Hospitality Management, which both would end up owning a piece of Innkeepers, people familiar with the matter said. Hersha, a hotel-management company partially owned by Starwood, would manage the properties for the ownership group, one of the people said.
Lehman would convert a chunk of its mortgage debt to ownership stakes in Innkeepers. Some of the remaining mortgage debt would be paid back, people familiar with the matter said.
Overall, the assumed debt, conversion of Lehman debt to equity and other cash contributions bring the value of the deal to more than $1 billion, the people said.
* Innkeepers Keeps Chapter 11 Control 9/14/2011
* Innkeepers, Cerberus Spar 9/1/2011
* Innkeepers Sues Cerberus 8/30/2011
* Innkeepers in Escrow Fight 8/24/2011
* Cerberus Puts Off Closing Innkeepers Deal 8/17/2011