Hearing Date: May 10, 2011 at 10:00 a.m. (ET Objection Deadline: May 6, 2011 at 4:00 p.m. (ET James H.M. Sprayregen, P.C. Paul M. Basta Stephen E. Hessler Brian S. Lennon KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212 446-4800 Facsimile: (212 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312 862-2000 Facsimile: (312 862-2200 Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 INNKEEPERS USA TRUST, et al., 1 Case No. 10-13800 (SCC Debtors. Jointly Administered NOTICE OF DEBTORS MOTION FOR ENTRY OF AN ORDER APPROVING (A ADEQUACY OF THE DISCLOSURE STATEMENT; (B CERTAIN DATES RELATED TO CONFIRMATION OF THE PLAN; (C CERTAIN VOTING PROCEDURES AND THE FORM OF CERTAIN DOCUMENTS TO BE DISTRIBUTED IN CONNECTION WITH SOLICITATION OF THE PLAN; AND (D PROPOSED VOTING AND GENERAL TABULATION PROCEDURES 1 The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtor s federal tax identification number can be found by visiting the Debtors restructuring website at www.omnimgt.com/innkeepers or by contacting Omni Management Group, LLC at Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436. The (continued on next page K&E 18667565
PLEASE TAKE NOTICE that a hearing (the Hearing 2 for the relief requested in the above-referenced motion (the Motion will be held before the Honorable Shelley C. Chapman, United States Bankruptcy Judge, in Courtroom No. 610 of the United States Bankruptcy Court for the Southern District of New York (the Court, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004-1408, on May 10, 2011 at 10:00 a.m. prevailing Eastern Time or such other time as counsel may be heard. PLEASE TAKE FURTHER NOTICE that any objections to the Motion: (a must be in writing; (b shall conform to the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules, all General Orders of the Court, the Local Rules for the United States Bankruptcy Court for the Southern District of New York (the Local Bankruptcy Rules, and the Notice, Case Management, and Administrative Procedures [Docket No. 68] (the Case Management Procedures approved by the Court; (c shall be filed with the Bankruptcy Court electronically by registered users of the Bankruptcy Court s case filing system (the User s Manual for the Electronic Case Filing System can be found at www.nysb.uscourts.gov, the official website for the Bankruptcy Court; and (d shall be served so as to be actually received no later than May 6, 2011 at 4:00 p.m. prevailing Eastern Time by the entities on the Master Service List (as such term is defined in the Case Management Procedures, which is available at www.omnimgt.com/innkeepers, the website maintained by Omni Management Group, LLC, the Debtors notice and claims agent. Only those objections that are timely filed, served, and received will be considered. location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480. 2 All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Motion. K&E 18667565 2
New York, New York Dated: April 8, 2011 /s/ Brian S. Lennon James H.M. Sprayregen, P.C. Paul M. Basta Stephen E. Hessler Brian S. Lennon KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212 446-4800 Facsimile: (212 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312 862-2000 Facsimile: (312 862-2200 Counsel to the Debtors and Debtors in Possession K&E 18667565 3
Hearing Date: May 10, 2011 at 10:00 a.m. (ET Objection Deadline: May 6, 2011 at 4:00 p.m. (ET James H.M. Sprayregen, P.C. Paul M. Basta Stephen E. Hessler Brian S. Lennon KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212 446-4800 Facsimile: (212 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312 862-2000 Facsimile: (312 862-2200 Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 INNKEEPERS USA TRUST, et al., 1 Case No. 10-13800 (SCC Debtors. Jointly Administered DEBTORS MOTION FOR ENTRY OF AN ORDER APPROVING (A ADEQUACY OF THE DISCLOSURE STATEMENT; (B CERTAIN DATES RELATED TO CONFIRMATION OF THE PLAN; (C CERTAIN VOTING PROCEDURES AND THE FORM OF CERTAIN DOCUMENTS TO BE DISTRIBUTED IN CONNECTION WITH SOLICITATION OF THE PLAN; AND (D PROPOSED VOTING AND GENERAL TABULATION PROCEDURES 1 1 The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtor s federal tax identification number can be found by visiting the Debtors restructuring website at www.omnimgt.com/innkeepers or by contacting Omni Management Group, LLC at Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436. The (continued on next page K&E 18667565
EXHIBITS EXHIBIT A Proposed Form of Disclosure Statement Order EXHIBIT A-1 Proposed Form of Solicitation Procedures EXHIBIT A-2 Proposed Form of Confirmation Hearing Notice EXHIBIT A-3 Proposed Form of Ballots EXHIBIT A-4 Proposed Form of Non-Voting Status Notice Claims Not Classified EXHIBIT A-5 Proposed Form of Non-Voting Status Notice Deemed to Reject EXHIBIT A-6 EXHIBIT A-7 EXHIBIT A-8 Proposed Form of Notice to Counterparties to Assumed Executory Contracts and Unexpired Leases Proposed Form of Notice to Counterparties to Rejected Executory Contracts and Unexpired Leases Proposed Form of Disputed Claims or Interests Notice EXHIBIT A-9 Proposed Form of Disclosure Statement Hearing Notice location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480. K&E 18667565 2
Innkeepers USA Trust and certain of its affiliates, as debtors and debtors in possession (collectively, the Debtors, file this motion (this Motion for the entry of an order, substantially in the form attached hereto as Exhibit A (the Disclosure Statement Order approving (a the adequacy of the Disclosure Statement for the Debtors Plans of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the Disclosure Statement ; (b certain dates related to confirmation of the Debtors Plans of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the Plan ; (c certain voting procedures and the form of certain documents to be distributed in connection with the solicitation of the Plan; and (d proposed voting and general tabulation procedures. In support of this Motion, the Debtors respectfully state as follows: 2 Preliminary Statement 1. Concurrently with filing this Motion, the Debtors are filing the Plan and the Disclosure Statement. As described in more detail in the Disclosure Statement, the Plan is comprised of four joint plans of reorganization, including (a the Fixed/Floating Plan, which addresses the properties securing the Fixed Rate Loan and the Floating Rate Loan (the Fixed/Floating Hotels, (b the Anaheim Plan, which addresses the Anaheim Hilton Suites Hotel, (c the Ontario Plan, which addresses the Hilton Ontario Hotel, and (d the Reorganizing Debtors Plan, which addresses the remaining five of the seven hotel properties that are secured by individual mortgages Residence Inn Mission Valley, Residence Inn Anaheim (Garden Grove, Doubletree Washington, DC, Residence Inn Tyson s Corner, and Homewood Suites San Antonio (the Reorganizing Hotels. 2 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Plan or the Disclosure Statement, as applicable. K&E 18667565 3
2. The Fixed/Floating Plan is consistent with the terms of the Commitment Letter, which the Debtors obtained Court approval to enter into on March 11, 2011 3 and which is supported by creditors holding more than $1 billion of the approximately $1.29 billion in prepetition secured claims against the Debtors (the Five Mile/Lehman Bid. 3. The Fixed/Floating Plan contemplates, among other things: full recoveries to holders of DIP Facility Claims in cash; for Midland, the Debtors largest creditor, a new note reducing principal amount owing under the Fixed Rate Loan from $825.4 million to at least $622.5 million with revised terms; for Lehman, the Debtors second-largest creditor, on account of the Floating Rate Mortgage Loan, (a up to 50% of the equity in the Reorganized Fixed/Floating Debtors (subject to adjustment for the Third-Party Investment and (b $26.2 million in cash; for Five Mile, in exchange for $174.1 million in cash, 50% of the equity in the Reorganized Fixed/Floating Debtors (subject to adjustment for the Third-Party Investment; and $3.75 million to holders of General Unsecured Claims, along with a release of preference actions under section 547 of the Bankruptcy Code. 4. The Five Mile/Lehman Bid is subject to overbids and the Bidding Procedures Order also authorized bidding procedures by which the Debtors will conduct an auction for the Fixed/Floating Hotels. At this time, the Debtors are continuing to market the Fixed/Floating Hotels in order to solicit as many viable bids as possible before the April 25, 2011 bid deadline for bids for the Fixed/Floating Hotels. To the extent there are competing bids that are qualified 3 Order (I Authorizing the Debtors to Enter into the Amended Commitment Letter with Five Mile Capital II Pooling REIT LLC, Lehman ALI Inc., and Midland Loan Services, (II Approving the Amended New Party/Midland Commitment Between the Debtors and Midland Loan Services, (III Approving Fixed/Floating Bidding Procedures, (IV Approving Bid Protections, (V Authorizing an Expense Reimbursement to Bidder D, and (VI Modifying Cash Collateral Order to Increase Expense Reserve [Docket No. 1011] (the Bidding Procedures Order. K&E 18667565 4
in accordance with the Bidding Procedures Order, an auction will be held on May 2, 2011 at 10:00 a.m. prevailing Eastern Time. 5. The Debtors also have the ability to exercise their fiduciary out under the Commitment Letter, which allows them to pursue any alternative transaction and decline to pursue the Five Mile/Lehman Bid if, upon the determination by the Debtors directors, trustees, or members, as applicable, the Debtors fiduciary duties require them to do so. If the marketing process does not result in a higher or otherwise better bid for the Fixed/Floating Hotels and the Debtors do not otherwise choose to exercise their fiduciary out, the Debtors currently intend to proceed with the Fixed/Floating Plan. If the marketing process results in a higher or otherwise better bid for the Fixed/Floating Hotels, the Debtors will file amended versions of the Plan and Disclosure Statement and seek to confirm and consummate a chapter 11 plan incorporating such superior bid. 6. The Five Mile/Lehman Bid does not include those Debtors that own or lease the assets commonly known as the Anaheim Hilton Suites, Hilton Ontario, Residence Inn Mission Valley, Residence Inn Anaheim (Garden Grove, Doubletree Washington, DC, Residence Inn Tyson s Corner, and Homewood Suites San Antonio (commonly referred to collectively as, the Seven Sisters. 7. Since approval of the Bidding Procedures Order, the Debtors have been working diligently to develop restructuring proposals for the Seven Sisters, with separate workstreams for the Anaheim Hilton Suites, the Ontario Hilton, and the Reorganizing Hotels. 8. As to the Anaheim Hilton, the Debtors are considering various restructuring alternatives, which include a sale of the property through the Anaheim Plan or giving the collateral securing the Secured Anaheim Hotel Mezzanine Loan Claims to TriMont Real Estate K&E 18667565 5
Advisors, Inc. ( TriMont, the special servicer under the Anaheim Hotel Mezzanine Loan. The Debtors are working with TriMont and CWCapital Asset Management LLC ( CWCapital the special servicer under the Anaheim Hilton Mortgage Loan to refine this process. If the Debtors reach an agreement to give the collateral securing the Anaheim Hotel Mezzanine Loan to TriMont, TriMont will likely satisfy all claims of the Anaheim Hotel Owner in full in cash, including those of CWCapital and the general unsecured creditors against the Anaheim Hotel Owner. With respect to a potential sale of the Anaheim Hilton, the Debtors have received several indications of interest. The Debtors have informed potential investors of their intended process of selecting a stalking horse for purchase of the property through a plan of reorganization. The Debtors are cautiously optimistic that, based on the indications of interest received to date, they will be able to choose a stalking horse bid for the Anaheim Hilton that will provide sufficient cash to satisfy the allowed claims of CWCapital and the general unsecured claims against the Anaheim Hotel Owner in full in Cash. The Debtors expect to finalize a strategy with respect to the Anaheim Hilton in the coming weeks. 9. As to the Ontario Hilton, the Ontario Plan contemplates the turnover of the Ontario Hilton to C-III Asset Management LLC ( C-III the special servicer under the Ontario Hotel Mortgage Loan. Over the next several weeks, the Debtors also intend to continue to market the Ontario Hilton and further explore the possibility of a sale of the asset. 10. As to the remaining Debtors, which, among other things, own or lease the Reorganizing Hotels (the Reorganizing Debtors, the Debtors are presently exploring multiple restructuring options, including, among other things, (a reinstatement of the Claims against and Interests in the Reorganizing Debtors or (b the sale of some or all of the Reorganizing Hotels with distributions of the sale(s made in accordance with the Distribution K&E 18667565 6
Waterfall. The Debtors are actively marketing the Reorganizing Hotels pursuant to a thorough process designed to generate as many viable bids as possible and maximize value to the Reorganizing Debtors estates. The Reorganizing Debtors Plan therefore currently contemplates alternate reinstatement or sale strategies. 11. In furtherance of these efforts, Moelis, the Debtors financial advisors, has sent out a call for offers to over 200 potential buyers, outlining the timing for bids and encouraging potential buyers to submit bids for any or all of the assets. As a result of these efforts, the Debtors anticipate a number of qualified and non-qualified bids that may be for the entire enterprise, a particular pool, a combination of assets different from those contained in the Five Mile/Lehman Bid, or an individual hotel. Moelis has requested that interested bidders submit their irrevocable bids prior to April 25, 2011. To the extent the Debtors believe, in an exercise of their business judgment, that proceeding with an auction including such bids will be valuemaximizing, the Debtors may hold a concurrent auction for those bids on May 2, 2011. That auction may or may not overlap with the auction for the Fixed/Floating Hotels. Moelis is in the process of informing potential non-qualified bidders that such an auction may take place on May 2, 2011. 12. As a result of thorough plan and subsequent marketing processes pursued by the Debtors over the past seven months, the Debtors are hopeful that the results of the continuing marketing process will reflect a robust market test of the value of the Debtors assets. 13. The Debtors seek the Court s approval for the schedule of events set forth below relating to confirmation and consummation of the Plan (the Plan Confirmation Schedule. 4 4 The Debtors may seek to amend the Plan Confirmation Schedule at a later date. K&E 18667565 7
EVENT Disclosure Statement Hearing DATE May 10, 2011, at 10:00 a.m. Eastern Time Voting Record Date May 10, 2011 Solicitation Date No later than May 13, 2011 Confirmation Objection Deadline June 10, 2011 Voting Deadline June 17, 2011 Confirmation Hearing June 23, 2011 5 Jurisdiction 14. The United States Bankruptcy Court for the Southern District of New York (the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b(2. 15. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. 16. The statutory bases for the relief requested herein are sections 105(a, 363, 502, 1123(a, 1124, 1125, 1126, and 1128 of title 11 of the United States Code (the Bankruptcy Code, Rules 2002, 3003, 3016, 3017, 3018, and 3020 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules, and Rules 3017-1, 3018-1, and 3020-1 of the Local Bankruptcy Rules for the Southern District of New York (the Local Bankruptcy Rules. Relief Requested 17. By this Motion, the Debtors seek the entry of the Disclosure Statement Order: (a approving the adequacy of the Disclosure Statement; (b fixing, subject to modification as appropriate, the dates contained in the Plan Confirmation Schedule (as defined herein; (c approving certain procedures by which certain holders of claims and interests entitled to vote may vote to accept or reject the Plan, which procedures are generally described herein and are set 5 Subject to the Court s availability K&E 18667565 8
forth in Exhibit 1 attached to Exhibit A hereto (the Solicitation Procedures, and the form of certain documents to be distributed in connection with the solicitation of the Plan; and (d approving the proposed voting and general tabulation procedures. Background 18. On July 19, 2010 (the Petition Date, each of the Debtors filed a petition with the Court under chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases. The Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules. The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a and 1108 of the Bankruptcy Code. No request for the appointment of a trustee has been made in the Chapter 11 Cases. On July 28, 2010, the United States Trustee for the Southern District of New York (the U.S. Trustee appointed an official committee of unsecured creditors (the Creditors Committee. 19. Additional information regarding the Debtors business, capital structure, and the circumstances leading to the Chapter 11 Cases is contained in the Amended Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, in Support of First-Day Pleadings [Docket No. 33, as supplemented by Docket No. 516]. The Debtors Plan and the Disclosure Statement 20. In accordance with section 1126 of the Bankruptcy Code, the Plan contemplates classifying Holders of Claims and Interests (each as defined in the Plan into certain classes with respect to each of the applicable Debtors for all purposes, including with respect to voting on the Plan, as follows: K&E 18667565 9
Class Claims and Interests Status Voting Rights Class FF1 Other Priority Claims Against Fixed/Floating Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class FF2 Other Secured Claims Against Fixed/Floating Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class FF3A Secured Fixed Rate Pool Mortgage Loan Claims Against Fixed/Floating Debtors Impaired Entitled to Vote Class FF3B Class FF4 Class FF5 Class FF6 Secured Floating Rate Pool Mortgage Loan Claims Against Fixed/Floating Debtors Floating Rate Pool Mezzanine Loan Claims Against Fixed/Floating Debtors General Unsecured Claims Against Fixed/Floating Debtors Mortgage Loan Deficiency Claims Against Fixed/Floating Debtors Impaired Impaired Impaired Impaired Entitled to Vote Entitled to Vote Entitled to Vote Not Entitled to Vote (Deemed to Reject Class FF7 Intercompany Claims Against Fixed/Floating Debtors Impaired Not Entitled to Vote (Deemed to Reject Class FF8 Section 510(b Claims Against Fixed/Floating Debtors Impaired Not Entitled to Vote (Deemed to Reject Class FF9 Interests in Fixed/Floating Debtors Impaired Not Entitled to Vote (Deemed to Reject Class A1 Other Priority Claims against Anaheim Hotel Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class A2 Other Secured Claims against Anaheim Hotel Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class A3 Secured Anaheim Hotel Mortgage Loan Claims Unimpaired Not Entitled to Vote (Presumed to Accept Class A4 Secured Anaheim Hotel Mezzanine Loan Claims Impaired Entitled to Vote Class A5A Class A5B Class A5C Class A6 General Unsecured Claims against Anaheim Hotel Owner General Unsecured Claims against Anaheim Mezzanine Debtor General Unsecured Claims against Anaheim Hotel Lessee Anaheim Hotel Mezzanine Loan Deficiency Claims against Anaheim Hotel Debtors Unimpaired Impaired Impaired Impaired Not Entitled to Vote (Presumed to Accept Entitled to Vote Entitled to Vote Not Entitled to Vote (Deemed to Reject Class A7 Intercompany Claims against Anaheim Hotel Debtors Impaired Not Entitled to Vote (Deemed to Reject Class A8A Section 510(b Claims against Anaheim Hotel Owner Unimpaired Not Entitled to Vote (Presumed to Accept Class A8B Section 510(b Claims against Anaheim Mezzanine Debtor Impaired Not Entitled to Vote (Deemed to Reject Class A8C Section 510(b Claims against Anaheim Hotel Lessee Impaired Entitled to Vote Class A9A Intercompany Interests in Anaheim Hotel Owner Unimpaired Not Entitled to Vote (Presumed to Accept Class A9B Intercompany Interests in Anaheim Mezzanine Debtor Impaired Not Entitled to Vote (Deemed to Reject K&E 18667565 10
Class Claims and Interests Status Voting Rights Class A9C Intercompany Interests in Anaheim Hotel Lessee Impaired Entitled to Vote Class O1 Other Priority Claims against Ontario Hotel Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class O2 Other Secured Claims Ontario Hotel Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class O3 Secured Ontario Hotel Mortgage Loan Claims Impaired Entitled to Vote Class O4A General Unsecured Claims against Ontario Hotel Owner Impaired Entitled to Vote Class O4B General Unsecured Claims against Ontario Hotel Lessee Impaired Entitled to Vote Class O5 Mortgage Loan Deficiency Claims against Ontario Hotel Debtors Impaired Not Entitled to Vote (Deemed to Reject Class O6 Intercompany Claims against Ontario Hotel Debtors Impaired Not Entitled to Vote (Deemed to Reject Class O7 Section 510(b Claims against Ontario Hotel Debtors Impaired Not Entitled to Vote (Deemed to Reject Class O8 Intercompany Interests in Ontario Hotel Debtors Impaired Not Entitled to Vote (Deemed to Reject Class R1 Other Priority Claims against the Reorganizing Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class R2 Other Secured Claims against the Reorganizing Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class R3A Secured Garden Grove Hotel Mortgage Loan Claims TBD Entitled to Vote on a Provisional Basis Class R3B Secured San Diego Hotel Mortgage Loan Claims Unimpaired Not Entitled to Vote (Presumed to Accept Class R3C Secured Washington DC Hotel Mortgage Loan Claims Unimpaired Not Entitled to Vote (Presumed to Accept Class R3D Secured Tysons Corner Hotel Mortgage Loan Claims Unimpaired Not Entitled to Vote (Presumed to Accept Class R3E Secured San Antonio Hotel Mortgage Loan Claims Unimpaired Not Entitled to Vote (Presumed to Accept Class R4 General Unsecured Claims against the Reorganizing Debtors TBD Entitled to Vote on a Provisional Basis Class R5 Intercompany Claims against the Reorganizing Debtors Impaired Not Entitled to Vote (Deemed to Reject Class R6 Intercompany Interests in the Reorganizing Debtors Unimpaired Not Entitled to Vote (Presumed to Accept Class R7 Innkeepers USA LP Preferred D Interests TBD Entitled to Vote on a Provisional Basis Class R8 Innkeepers USA Trust Preferred C Interests TBD Entitled to Vote on a Provisional Basis Class R9 Innkeepers USA Trust Preferred A Interests TBD Entitled to Vote on a Provisional Basis Class R10 Innkeepers USA Trust Common Interests TBD Entitled to Vote on a Provisional Basis K&E 18667565 11
Class Claims and Interests Status Voting Rights Class R11 Grand Prix Holdings Interests TBD Entitled to Vote on a Provisional Basis Class R12 Section 510(b Claims against the Reorganizing Debtors Unimpaired Not Entitled to Vote (Presumed to Accept 21. The Debtors propose to solicit votes from Holders of Claims in Classes FF3A, FF3B, FF4, FF5, A4, A5B, A5C, A8C, A9C, O3, O4A, O4B, R3A, R4, R7, R8, R9, R10, and R11 (collectively, the Voting Classes. 6 The Debtors do not intend to solicit votes from Holders of Claims and Interests in Classes FF6, FF7, FF8, FF9, A6, A7, A8B, A9B, O5, O6, O7, O8, and R5 (the Impaired Rejecting Classes because such Classes are not receiving any distribution under the Plan and are, therefore, deemed to have rejected the Plan. The Debtors also do not intend to solicit votes from Holders of Claims that have not been classified in accordance with section 1123(a(1 of the Bankruptcy Code (the Unclassified Claims and together with the Impaired Rejecting Classes, the Non-Voting Parties. Basis for Relief I. The Disclosure Statement Contains Adequate Information and Should Be Approved. 22. Pursuant to section 1125 of the Bankruptcy Code, the proponent of a proposed chapter 11 plan must provide holders of impaired claims and interests entitled to vote on the plan with adequate information regarding that plan. Section 1125(a(1 of the Bankruptcy Code states, in relevant part, that adequate information means: [I]nformation of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor s books and records, 6 Holders of Claims in Classes R3A, R4, R7, R8, R9, R10, and R11 are entitled to vote to accept or reject the Plan on a provisional basis. K&E 18667565 12
11 U.S.C. 1125(a(1. including a discussion of the potential material federal tax consequences of the plan to the debtor, any successor to the debtor, and a hypothetical investor typical of the holders of claims or interests in the case, that would enable such a hypothetical investor of the relevant class to make an informed judgment about the plan.... 23. Thus, a disclosure statement must, as a whole, provide information that is reasonably practicable to permit an informed judgment by creditors and interest holders, if applicable, to vote on a plan. In re Momentum Mfg. Corp., 25 F.3d 1132, 1136 (2d Cir. 1994; see also In re Ionosphere Clubs, Inc., 179 B.R. 24, 29 (Bankr. S.D.N.Y. 1995 (the adequacy of a disclosure statement is to be determined on a case-specific basis under a flexible standard that can promote the policy of Chapter 11 towards fair settlement through a negotiation process between informed interested parties (internal citation omitted. 24. Courts are vested with wide discretion to determine whether a disclosure statement contains adequate information within the meaning of section 1125(a. Kirk v. Texaco, Inc., 82 B.R. 678, 682 (S.D.N.Y. 1988 ( The legislative history could hardly be more clear in granting broad discretion to bankruptcy judges under 1125(a..... This discretion is intended to permit courts to tailor disclosures made in connection with soliciting votes on a plan of reorganization to facilitate the effective reorganization of debtors in a broad range of businesses and circumstances. Id. (stating bankruptcy judges have a clear congressional mandate to exercise broad discretion in their supervision of corporate reorganizations ; see also H.R. Rep. No. 95-595, at 408-09 (1977. Accordingly, the determination of whether a disclosure statement contains adequate information must be made on a case-by-case basis, focusing on the unique facts and circumstances of each case. In re Phoenix Petroleum Co., 278 B.R. 385, 393 (Bankr. E.D. Pa. 2001. K&E 18667565 13
25. The Disclosure Statement is the product of the Debtors extensive review and analyses of their business operations, assets and liabilities, and circumstances leading to the Chapter 11 Cases. In addition, the Disclosure Statement reflects: (a the Debtors thorough evaluation of the Plan; (b the proposed distributions to Holders of Claims and Interests under the Plan; (c the effect of the Plan on Holders of Claims and Interests and other parties in interest; and (d the resultant restructuring of the Debtors estates if the Plan is confirmed and consummated. As described above, the Debtors have scheduled an auction at least with respect to the Fixed/Floating Debtors and possibly with respect to the other Debtors for May 2, 2011 eight days prior to the hearing on this Motion (the Disclosure Statement Hearing. The Debtors will continue to update the Disclosure Statement as necessary, including to reflect the outcome of any such auctions. 26. Additionally, the Disclosure Statement contains pertinent information necessary for Holders of Claims and Interests to make an informed decision about whether to vote to accept or reject the Plan, including, among other things, information regarding: a. the Debtors corporate history and corporate structure, business operations, and prepetition capital structure and indebtedness; b. events leading to the Chapter 11 Cases, including the Debtors prepetition restructuring negotiations; c. the classification and treatment of Claims and Interests under the Plan; d. the means for implementing the Plan; e. the provisions governing distributions under the Plan; f. the procedures for resolving contingent, unliquidated, and disputed Claims under the Plan; g. settlement, release, exculpation, injunction, and related provisions of the Plan; h. the conditions precedent to the effective date of the Plan; K&E 18667565 14
i. risk factors related to the Plan and alternatives to confirming and consummating the Plan; and j. certain U.S. federal income tax consequences to the Debtors of Plan implementation. 27. Accordingly, the Debtors respectfully submit that the Disclosure Statement contains more than sufficient information for a hypothetical reasonable investor to make an informed judgment about the Plan and complies with all aspects of section 1125 and should be approved. See id. at 393 n.6 (listing the factors courts have considered in determining the adequacy of information provided in a disclosure statement. 28. To the extent necessary, the Debtors will demonstrate at the Disclosure Statement Hearing that the Disclosure Statement addresses the information set forth above in a manner that provides Holders of Claims and Interests entitled to vote to accept or reject the Plan with adequate information within the meaning of section 1125. II. The Court Should Establish the Proposed Plan Confirmation Schedule. 29. The Debtors respectfully request that the Court approve the setting of the Plan Confirmation Schedule, in accordance with section 1126(c of the Bankruptcy Code and Bankruptcy Rules 3017(d and 3018(a. 30. Local Bankruptcy Rule 9076-1 provides that the Debtors may request a conference for the purpose of a scheduling order, and the Court may enter such order after notice to all parties in interest. Pursuant to Local Bankruptcy Rule 9076-1, the Debtors request that the Disclosure Statement Hearing serve as the scheduling conference with respect to the Plan Confirmation Schedule. A. The Voting Record Date 31. Bankruptcy Rule 3017(d provides that, upon approval of a disclosure statement, except to the extent the Court orders otherwise with respect to one or more unimpaired classes of K&E 18667565 15
creditors or equity security holders, the debtor will mail to all creditors, equity security holders, and the United States Trustee, a copy of the plan, the disclosure statement, notice of the voting deadline, and such other information as the court may direct. Fed. R. Bankr. P. 3017(d. 32. For the purposes of soliciting votes in connection with the confirmation of a plan, creditors and equity security holders shall include holders of stocks, bonds, debentures, notes and other securities of record on the date the order approving the disclosure statement is entered or another date fixed by the Court, for cause, after notice and a hearing. Id. Additionally, Bankruptcy Rule 3018(a provides, in relevant part: Fed. R. Bankr. P. 3018(a. [A]n equity security holder or creditor whose claim is based on a security of record shall not be entitled to accept or reject a plan unless the equity security holder or creditor is the holder of record of the security on the date the order approving the disclosure statement is entered or on another date fixed by the court, for cause, after notice and a hearing. 33. The Debtors request that the Court exercise its authority under Bankruptcy Rules 3017(d and 3018(a and establish May 10, 2011 the date of the Disclosure Statement Hearing as the voting record date (the Voting Record Date for the purpose of determining which creditors and holders of interests are entitled to receive the solicitation materials required by Bankruptcy Rule 3017(d and related documents (the Solicitation Package and to vote on the Plan. The Confirmation Hearing Notice will state prominently the Voting Record Date. 34. The Debtors propose that with respect to any transferred Claim or interest, the transferee shall be entitled to receive a Solicitation Package and, if the Holder of such Claim or Interest is entitled to vote with respect to the Plan, cast a Ballot (as defined in the Plan on account of such Claim or Interest only if: (a the transfer or assignment has been fully effectuated K&E 18667565 16
pursuant to the procedures dictated by Bankruptcy Rule 3001(e; and (b for Claims, such transfer is reflected on the Claims Register (as defined in the Plan on or before the Voting Record Date. B. The Voting Deadline 35. Bankruptcy Rule 3017(c provides, in relevant part, [o]n or before approval of the disclosure statement, the court shall fix a time within which the holders of claims and interests may accept or reject the plan... Fed. R. Bankr. P. 3017(c. The Debtors respectfully request that the Court exercise its authority under Bankruptcy Rule 3017(c to establish 4:00 p.m. prevailing Eastern Time on or around June 17, 2011, the date that is approximately 25 calendar days after the Solicitation Date, as the voting deadline (the Voting Deadline. The Debtors propose that for votes to be counted, all Ballots must be properly executed, completed, and delivered, as specified in section B of the Solicitation Procedures, by the Voting Deadline. The Confirmation Hearing Notice will state prominently the Voting Deadline. C. Procedures for Filing Objections to Confirmation of the Plan 36. The Debtors request that the Court direct the manner in which objections to confirmation shall be made. Pursuant to Bankruptcy Rule 3020(b(l, objections to confirmation of a plan must be filed and served within a time fixed by the Bankruptcy Court. Fed. R. Bankr. P. 3020(b(1. Local Bankruptcy Rule 3020-1 further provides that objections to confirmation of a plan must be submitted no later than three days prior to the first date set for the hearing to consider confirmation of the plan. 37. The purpose of the Confirmation Hearing Notice is to explain that objections to Confirmation of the Plan or requests for modifications to the Plan, if any, must: a. be in writing; b. conform to the Bankruptcy Rules and the Local Bankruptcy Rules; K&E 18667565 17
c. state the name and address of the objecting entity and the amount and nature of the Claim or Interest of such entity; d. state with particularity the basis and nature of any objection to the Plan and, if practicable, a proposed modification to the Plan that would resolve such objection; and e. be filed, contemporaneously with a proof of service, with the Court and served so that it is actually received by the notice parties identified in the Confirmation Hearing Notice on or prior to the Confirmation Objection Deadline. 38. The Debtors request that the Court establish June 10, 2011 at 4:00 p.m. prevailing Eastern Time as the deadline for filing and serving objections and proposed modifications to the Plan (the Confirmation Objection Deadline. The Debtors believe the Confirmation Objection Deadline will afford the Court, the Debtors, and other parties in interest reasonable time to consider the objections and proposed modifications prior to the Confirmation Hearing. D. The Confirmation Hearing 39. In accordance with Bankruptcy Rule 3017(c and section 1128 of the Bankruptcy Code (requiring a confirmation hearing with respect to any chapter 11 plan, the Debtors request that the hearing on confirmation of the Plan (the Confirmation Hearing be scheduled on or around June 23, 2011, or at the Court s earliest convenience thereafter. 40. The Debtors submit that the proposed timing for the Confirmation Hearing is in compliance with the Bankruptcy Code, the Bankruptcy Rules, and the Local Bankruptcy Rules, and will enable the Debtors to pursue confirmation of the Plan consistently with the design of their carefully negotiated restructuring and the June 30, 2011 confirmation deadline for the Fixed/Floating Plan set forth in the Commitment Letter. 41. In addition, the Debtors believe that the voting may be expedited with respect to certain individual properties, such as the Anaheim Hilton and the Hilton Ontario, and they K&E 18667565 18
reserve the right to modify the request for the Plan Confirmation Deadline prior to the Disclosure Statement Hearing to attain consensus. III. The Court Should Approve Certain Voting Procedures and the Form of Certain Documents to be Distributed in Connection with Solicitation of the Plan. A. The Solicitation and Notice Procedures 42. To conduct an effective solicitation of votes to accept or reject the Plan in a manner that is consistent with the requirements of the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules, and due process, the Debtors seek approval of the Solicitation Procedures. The Debtors believe the Solicitation Procedures are well-designed and tailored specifically to solicit votes to accept or reject the Plan effectively. 43. On July 20, 2010, the Court entered an order [Docket No. 57] authorizing the Debtors to retain Omni Management Group, LLC (the Notice and Claims Agent to, among other things, act as notice, claims, and solicitation agent in connection with any proposed chapter 11 plan of reorganization process. The Debtors respectfully request that the Notice and Claims Agent be authorized (to the extent not already authorized to assist the Debtors in: a. distributing the Solicitation Packages; b. soliciting votes to accept or reject the Plan; c. receiving, tabulating, and reporting on Ballots cast to accept or reject the Plan by Holders of Claims and Interests and decisions to opt out of the third party release provisions of Article VIII of the Plan; d. responding to inquiries from Holders of Claims and Interests and other parties in interest relating to the Disclosure Statement, the Plan, the Ballots, the Solicitation Procedures, and all other documents contained in the Solicitation Package and matters related thereto, including the procedures and requirements for voting to accept or reject the Plan and for objecting to the Plan; and e. if necessary, contacting Holders of Claims and Interests regarding the Plan. K&E 18667565 19
44. The Debtors propose to distribute the Solicitation Package required by Bankruptcy Rule 3017(d to those entities entitled to vote on the Plan in the form and manner described below and set forth in Section C of the Solicitation Procedures. 45. Specifically, the Solicitation Package shall contain copies of the following: a. the Confirmation Hearing Notice; b. an appropriate form of Ballot and voting instructions with respect thereto (with a pre-addressed, postage prepaid return envelope; c. a CD-ROM containing the Disclosure Statement Order (with the Solicitation Procedures, which shall be Exhibit 1 attached thereto and the approved form of the Disclosure Statement (together with the exhibits attached thereto, including the Plan, which shall be Exhibit A attached thereto, if applicable; d. where applicable, a letter, in form and substance acceptable to the Debtors, in their discretion, from counsel for the Creditors Committee urging the Holders of General Unsecured Claims to vote to accept the Plan; and e. such other materials as the Court may direct. 46. The distribution of the Solicitation Packages by the Solicitation Date will provide all Holders of Claims and Interests entitled to vote on the Plan with the requisite materials and sufficient time to make an informed decision with respect to the Plan. Fed. R. Bankr. P. 3017(d (providing that, after approval of a disclosure statement, a debtor must transmit the plan, the approved disclosure statement, a notice of the time within which acceptances and rejections of such plan may be filed, and any other information that the Court may direct to certain holders of claims; Fed. R. Bankr. P. 2002(b (requiring not less than 28 days notice by mail of the time for filing objections and the hearing to consider the confirmation of a chapter 11 plan. Additionally, and as described more fully below, the Debtors will cause the Notice and Claims Agent to serve a notice of the Confirmation Hearing substantially in the form attached as K&E 18667565 20
Exhibit 2 to Exhibit A hereto (the Confirmation Hearing Notice on all Holders of Claims and Interests. 47. Through the Notice and Claims Agent, the Debtors intend to distribute the Solicitation Packages on or about May 13, 2011, which is approximately 25 calendar days before the Voting Deadline (the Solicitation Date. The Debtors submit that distribution of the Solicitation Packages approximately 25 calendar days before the Voting Deadline will provide the requisite materials to Holders of Claims and Interests entitled to vote on the Plan in compliance with Bankruptcy Rules 2002(b and 3017(d. See Fed. R. Bankr. P. 2002(b, 3017(d. 48. To the extent that circumstances require further modifications of, or amendments to, the Solicitation Procedures, the Debtors reserve the right to supplement or amend the Solicitation Procedures to facilitate further the solicitation of the Plan. Specifically, the Debtors reserve the right to shorten the periods under the Solicitation Procedures for Debtors with readily identifiable creditors if such expediency will help create consensus, with deference to the due process rights of all Holders of Claims and Interests entitled to vote on the Plan. B. The Form of the Ballots 49. In accordance with Bankruptcy Rule 3018(c, the Debtors have prepared and customized Ballots for Holders of Claims and Interests (substantially in the form of the Ballot attached as Exhibit 3 to Exhibit A hereto to tabulate acceptances and rejections of the Plan. 50. The forms of the Ballots are based on Official Form No. 14 and have been modified to (a address the particular circumstances of the Chapter 11 Cases and (b include certain additional information that the Debtors believe to be relevant and appropriate for each Class of Claims and Interests entitled to vote on the Plan. See Fed. R. Bankr. P. 3017(d (debtors shall mail a form of ballot conforming to the appropriate Official Form to creditors. K&E 18667565 21
51. As noted above, the solicitation process shall be conducted by the Notice and Claims Agent. Pursuant to the Solicitation Procedures, the Notice and Claims Agent will distribute the appropriate Ballots to the Holders of Claims and Interests in the Voting Classes. The Non-Voting Parties will receive the Non-Voting Status Notices (as defined and discussed below and attached as Exhibit 4 and Exhibit 5 to Exhibit A hereto in lieu of the Solicitation Package. The Debtors submit that the forms of the Ballots comply with Bankruptcy Rule 3018(c and, therefore, should be approved. C. The Confirmation Hearing Notice 52. Bankruptcy Rules 2002(b and (d require not less than 28 days notice to all holders of claims or equity interests of the time fixed for filing objections to the hearing on confirmation of a chapter 11 plan. To satisfy this requirement, the Debtors intend to send a copy of the Confirmation Hearing Notice to (a all Holders of Claims and Interests in Voting Classes, as part of the Solicitation Package, (b all Holders of Claims and Interests in the Non-Voting Classes, and (c other parties entitled to service in these Chapter 11 Cases. In accordance with Bankruptcy Rules 2002 and 3017(d, the Confirmation Hearing Notice shall contain, among other things: a. the time, date, and place for the Confirmation Hearing; b. the Voting Record Date; c. the Voting Deadline; d. the Confirmation Objection Deadline and the manner in which objections shall be filed; e. the procedures for the temporary allowance of Claims and Interests; and f. a disclosure regarding the release, exculpation, and injunction provisions of Article VIII of the Plan. K&E 18667565 22
53. Additionally, the Confirmation Hearing Notice will inform entities that the Solicitation Package may be obtained: (a from the Notice and Claims Agent at its website at www.omnimgt.com/innkeepers, (b by writing to Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436, or (c for a fee via PACER at https://ecf.nysb.uscourts.gov (except Ballots. 54. The Debtors respectfully request that the Court find that the Confirmation Hearing Notice complies with the requirements of Bankruptcy Rules 2002(b and (d. The Debtors further request that the Court determine the Confirmation Hearing Notice contains sufficient disclosure regarding release, exculpation, and injunction provisions contained in Article VIII of the Plan. 55. In addition to mailing the Confirmation Hearing Notice, the Debtors propose to publish the Confirmation Hearing Notice (in a format modified for publication in USA Today on a date no fewer than ten calendar days prior to the Voting Deadline. Bankruptcy Rule 2002(l permits the Court to order notice by publication if it finds that notice by mail is impracticable or that it is desirable to supplement notice. Fed. R. Bankr. P. 2002(l. The Debtors believe publication of the Confirmation Hearing Notice will provide sufficient notice of the approval of the Disclosure Statement, the date for the Confirmation Hearing, the Voting Record Date, the Voting Deadline, and the Confirmation Objection Deadline to entities who will not otherwise receive notice by mail as provided in the Solicitation Procedures. D. The Notices to Unclassified Claims and Classes Deemed to Reject the Plan 56. In compliance with section 1123(a(1 of the Bankruptcy Code and as reflected in Article II of the Plan, Allowed Administrative Claims, Five Mile DIP Claims, Lehman DIP Claims, Postpetition Intercompany Loan Claims, and Priority Tax Claims are not classified under the Plan (collectively, the Unclassified Claims. See 11 U.S.C. 1123(a(1 (providing for K&E 18667565 23
classification of claims other than administrative and priority tax claims. As such, these Unclassified Claims are not entitled to vote on the Plan. Article III of the Plan also provides that certain classes are deemed to reject the Plan and, therefore, Holders of such Claims are not entitled to vote on the Plan (the Impaired Rejecting Classes. 57. Pursuant to Bankruptcy Rule 3017(d, a bankruptcy court may order that the Debtors need only provide unimpaired Classes with notice of their non-voting status, in addition to notice of the name and address of the agent from whom they may request a Solicitation Package. Accordingly, the Debtors respectfully submit that the Non Voting Status Notices comply with the Bankruptcy Code and, therefore, should be approved. 58. The Debtors do not intend to solicit votes from Unclassified Claims. The Debtors will, however, send the Non-Voting Status Notice, substantially in the form attached as Exhibit 4 to Exhibit A hereto (the Non-Voting Status Notice Claims Not Classified, in lieu of the Solicitation Package, to the Holders of Unclassified Claims. The Non-Voting Status Notice Claims Not Classified will explain to such Holders their non-voting status and that such Holder may obtain certain materials in the Solicitation Package from the Notice and Claims Agent. The Debtors respectfully submit that the Non-Voting Status Notice Claims Not Classified complies with the Bankruptcy Code and, therefore, should be approved. 59. Additionally, the Holders of Claims and Interests in the Impaired Rejecting Classes are not entitled to vote on the Plan and will not be solicited to vote on the Plan. The Debtors will, however, send to such Holders a non-voting status notice substantially in the form attached as Exhibit 5 to Exhibit A hereto (the Non-Voting Status Notice Deemed to Reject and together with the Non-Voting Status Notice Claims Not Classified, the Non- Voting Status Notices, in lieu of the Solicitation Package. The Non Voting Status K&E 18667565 24
Notice Deemed to Reject will explain to such Holders their non-voting status and also provide instructions regarding how to obtain certain materials with respect to the Solicitation Package (excluding Ballots from the Notice and Claims Agent. E. The Form of Notice to Counterparties to Executory Contracts and Unexpired Leases 60. The counterparties to the Debtors executory contracts and unexpired leases will receive on account of such executory contracts and unexpired leases, the Confirmation Hearing Notice and notices regarding the potential assumption or rejection of those executory contracts or unexpired leases, each substantially in the forms attached as Exhibit 6 and Exhibit 7 to Exhibit A hereto, respectively (collectively, the Notices to Counterparties to Executory Contracts and Unexpired Leases. If any of these entities also is a Holder of a Claim or Interest in a Voting Class as of the Voting Record Date, such entity shall also receive a Solicitation Package in accordance with the Solicitation Procedures. The Debtors respectfully submit that the Notices to Counterparties to Executory Contracts and Unexpired Leases comply with the Bankruptcy Code and, therefore, should be approved. IV. The Court Should Approve the Voting and General Tabulation Procedures. 61. The Debtors respectfully request that the Court approve the voting and tabulation procedures described in Section D of the Solicitation Procedures, which comply with section 1126(c of the Bankruptcy Code and Bankruptcy Rule 3018(a (the Voting and Tabulation Procedures. Section 1126(c provides: A class of claims has accepted a plan if such plan has been accepted by creditors, other than any entity designated under section (e of this section, that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors, other than any entity designed under subsection (e of this section, that have accepted or rejected the plan. K&E 18667565 25