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prevailing Eastern Time Objection Deadline: December 7, 2010 at 4:00 p.m. prevailing Eastern Time
James H.M. Sprayregen, P.C. Paul M. Basta 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: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered
NOTICE OF DEBTORS MOTION FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A PREMIUM FINANCING AND SECURITY AGREEMENT WITH IPFS CREDIT CORPORATION1
The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors 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 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.
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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 December 14, 2010 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, 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 Courts case filing system (the Users 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 to as to be actually received no later than December 7, 2010 at 4:00 p.m. prevailing Eastern Time by: (i) 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; and (ii) IPFS Credit Corporation d/b/a Imperial Credit Corporation. Only those objections that are timely filed, served, and received will be considered. PLEASE TAKE FURTHER NOTICE that, if no objections to the Motion are timely filed and served in accordance with this notice, the Court may enter an order granting some or all
All capitalized terms used by otherwise not defined herein shall have the meanings set forth in the Motion.
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of the relief requested in the Motion as requested by the Debtors without further notice or hearing. New York, New York Dated: November 23, 2010 /s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta 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
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Hearing Date and Time: December 14, 2010 at 10:00 a.m. prevailing Eastern Time Objection Deadline: December 7, 2010 at 4:00 p.m. prevailing Eastern Time
James H.M. Sprayregen, P.C. Paul M. Basta 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: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered
DEBTORS MOTION FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A PREMIUM FINANCING AND SECURITY AGREEMENT WITH IPFS CREDIT CORPORATION1 Innkeepers USA Trust (Innkeepers) and certain of its affiliates, as debtors and debtors in possession (collectively, the Debtors), file this motion (this Motion) for the entry
1
The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors 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 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.
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of an order, substantially in the form attached hereto as Exhibit A (the Order), (a) authorizing Innkeepers to (i) enter into a premium financing and security agreement (as described in paragraph 9 hereof, the PFA)2, a copy of which is attached as Exhibit B hereto, with IPFS Credit Corporation d/b/a Imperial Credit Corporation (IPFS) related to various insurance policies that cover all but one of the Debtors hotel properties to the extent applicable (the Policies) and (ii) grant IPFS a first priority security interest (but only to the extent permitted by applicable law) under the PFA in any premiums under the Policies that were paid in advance but are to be returned to Innkeepers due to a future cancellation or modification of the Policies (also known as returned or unearned premiums) and any amounts that may become payable to Innkeepers under the Policies due to future reconciliations performed in accordance with the terms of the Policies (also known as dividends) (collectively, the Security Interest), and (b) granting such other relief as is just and proper. In support of this Motion, the Debtors respectfully state as follows: Jurisdiction 1. 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). 2. 3. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. The statutory bases for the relief requested herein are sections 363 and 364 of title
11 of the United States Code (the Bankruptcy Code), Rule 4001 of the Federal Rules of
Contemporaneously with the filing of this Motion, the Debtors have filed a motion for the financing of insurance premiums for insurance policies providing coverage for their property.
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Bankruptcy Procedure (the Bankruptcy Rules), and Rule 4001-2 of the Local Bankruptcy Rules for the Southern District of New York (the Local Bankruptcy Rules). Background 4. 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). 5. 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]. Relief Requested 6. By this Motion, the Debtors seek entry of an order: (a) authorizing Innkeepers to
(i) enter into the PFA with IPFS and (ii) grant IPFS the Security Interest; and (b) granting such other relief as is just and proper.
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Concise Statement Pursuant to Bankruptcy Rule 4001 and Local Bankruptcy Rule 4001-2 7. Pursuant to Bankruptcy Rules 4001(c) and (d) and Local Bankruptcy Rule
4001-2, the following is a concise statement and summary of the proposed material terms of the PFA and the Order:3
Material Terms of the Postpetition Financing PFA Parties Fed. R. Bankr. P. 4001(c)(1)(B) Maturity Fed. R. Bankr. P. 4001(c)(1)(B) Purpose and Limitations Fed. R. Bankr. P. 4001(c)(1)(B), 40012(a)(9) Interest Rate Fed. R. Bankr. P. 4001(c)(1)(B) Amount Financed Local Bankruptcy Rule 4001-2(a)(1); Fed. R. Bankr. P. 4001(c)(1)(B) Material Conditions to Borrowing Local Bankruptcy Rule 4001-2(a)(2); Fed. R. Bankr. P. 4001(c)(1)(B) Debtor Party: Innkeepers USA Trust Lender Party: IPFS Corporation d/b/a Imperial Credit Corporation (PFA, at p. 1) Innkeepers final payment under the PFA is due June 1, 2011. (PFA, at p. 1) Funds obtained under the PFA will be used to finance certain premium payments or down payments being advanced by IPFS to certain insurance companies for certain insurance policies that provide coverage to the Debtors. (PFA, at pp. 1, 3)
Innkeepers shall pay IPFS a cash down payment of $1,168,363.26. Innkeepers shall repay IPFS in seven monthly payments of $313,953.78 beginning on December 1, 2010.
Innkeepers and IPFS shall execute the PFA, including the making of certain representations and warranties. (PFA, at p. 1)
This summary is qualified in its entirety by reference to the applicable provisions of the PFA. To the extent there exists any conflicts between this summary and the provisions of the PFA, the provisions of the PFA shall govern.
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Material Terms of the Postpetition Financing Fees and Expenses Local Bankruptcy Rule 4001-2(a)(3); Fed. R. Bankr. P. 4001(c)(1)(B) Fees and Expenses: $27,553.72
If IPFS hires an attorney to collect any money Innkeepers owes under the PFA, Innkeepers will pay such attorney fees and other collections costs if and to the extent permitted under applicable law (subject to limit of 20% of amount due under Florida law). (PFA at pp. 1-2) The PFA grants IPFS a first priority security interest in the Policies for (but only to the extent permitted by applicable law) (a) any return of premiums or unearned premiums under the Policies and (b) any dividends that may become due to the Debtors in connection with the Policies (as described above). Notwithstanding anything to the contrary contained in any order approving secured financing in the Chapter 11 Cases, the Security Interest granted to IPFS in connection with the Policies shall be senior to any security interests and/or liens granted to any other secured creditors in the Chapter 11 Cases. (PFA at p. 2; Order at 4, 6) A payment is not made when it is due; and
Liens and Priorities Local Bankruptcy Rule 4001-2(a)(4); Fed. R. Bankr. P. 4001(c)(1)(B)
Events of Default Local Bankruptcy Rule 4001-2(a)(10); Fed. R. Bankr. P. 4001(c)(1)(B) Automatic Stay & Remedies Local Bankruptcy Rule 4001-2(a)(10); Fed. R. Bankr. P. 4001(c)(1)(B)
Innkeepers fails to keep any promise Innkeepers makes in the PFA. (PFA, at p. 2) Automatic Stay: If Innkeepers does not timely make any of the payments due under the PFA as they become due (subject to any applicable cure period under the PFA and all other terms of the PFA), the automatic stay shall automatically modify solely to enable IPFS and/or third parties, including insurance companies providing the coverage under the Policies, to take steps necessary and appropriate to cancel the Policies, collect the Collateral (as defined herein), and apply such Collateral to the indebtedness owed to IPFS by Innkeepers in accordance with the Security Interest. (PFA at p. 1; Order at 8) Remedies: At any time after default, IPFS can demand and have the right to receive immediate payment (except to the extent otherwise provided by applicable law, in which case IPFS will have the right to receive such payment in accordance with such law) of the total unpaid balance due under the PFA even if IPFS has not received any refund of unearned premium.
In the event of default, IPFS has full authority to (a) cancel the Policies in accordance with the provisions of the PFA, (b) receive all sums assigned to IPFS, and (c) execute and deliver on behalf of Innkeepers all documents, forms, and notices relating to the Policies in furtherance of the PFA (to the extent enforceable under applicable law). (PFA at pp. 1-2)
The PFA 8. The Debtors request entry of an order, pursuant to sections 363 and 364 of the
Bankruptcy Code, for Innkeepers to enter into the PFA. The Debtors believe that the Court has 5
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already granted Innkeepers the authority to enter into the PFA in the Order Authorizing, but not Directing, the Debtors to (A) Maintain Prepetition Insurance Policies and Premium Financing Agreements and (B) Pay All Prepetition Obligations in Respect Thereof [Docket No. 186] (the Insurance Order).4 The terms of the insurance premium financing, including the interest rate, timing of payment, and remedies, are similar in all material respect to the premium financing agreements entered into by the Debtors in the past, including those referenced in the motion seeking approval of the Insurance Order.5 IPFS, the company that has offered to provide Innkeepers the best insurance premium finance agreement under the circumstances for the Policies, however, has conditioned its willingness to enter into the PFA upon the Debtors obtaining a court order explicitly authorizing Innkeepers to enter into the PFA with IPFS and providing for related relief requested herein. Accordingly, at the request of IPFS, the Debtors seek the relief requested herein to permit Innkeepers to enter into the PFA and obtain the considerable benefits provided thereunder. 9. Pursuant to the PFA, IPFS will provide financing to Innkeepers for the Policies,
which will provide insurance coverage for general liability, automobile liability, crime, workers compensation, employers practice liability, liquor liability, and umbrella liability. The Policies are essential to the preservation of the value of the Debtors business and assets. Moreover, in many cases, insurance coverage such as that provided by the Policies is required by the regulations, laws, and contracts that govern the Debtors commercial activities. Further, the guidelines of the Office of the United States Trustee for the Southern District of New York
4
Specifically, paragraph four of the Insurance Order provides that the Debtors are authorized, but not directed, to enter into new policies and [premium finance agreements] on an as-needed basis during the postpetition period without further Court approval. See Debtors Motion for the Entry of an Order Authorizing, but not Directing, the Debtors to (A) Maintain Prepetition Insurance Policies and Premium Financing Agreements and (B) Pay All Prepetition Obligations in Respect Thereof [Docket No. 17] at 8-12.
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(the U.S. Trustee) require debtors to maintain insurance coverage throughout their chapter 11 proceedings. 10. The PFA, which the Debtors believe represents the best financing available to
Innkeepers under the circumstances, will allow Innkeepers to pay the insurance premiums for the Policies over the applicable coverage periods6 and help Innkeepers manage its cash flow with reasonable financing costs. The PFA will finance total premiums of $3,338,486.00. The terms of the PFA provide that Innkeepers pay IPFS an initial down payment of $1,168,363.26, followed by seven monthly installments,7 each in the amount of $313,953.78 (bearing an annual interest rate of 3.46 percent), in exchange for IPFSs agreement to pay the insurance premiums to the insurance companies that will provide the Debtors with coverage under the Policies. 11. As collateral to secure the repayment of the indebtedness due under the PFA,
Innkeepers seeks to grant IPFS the Security Interest, which grants IPFS a security interest (but only to the extent permitted by applicable law) in any return of premiums or unearned premiums under the Policies and any dividends that may become due to the Debtors in connection with the Policies (as described above) (collectively, the Collateral). Further, pursuant to the terms of the PFA, the Debtors are appointing IPFS as its attorney-in-fact with the irrevocable power to cancel the Policies and collect the unearned premiums in the event Innkeepers is in default of its obligations under the PFA. Pursuant to the PFA, in the event that Innkeepers does not timely make any of the payments due under the PFA (subject to any applicable cure periods under the PFA), the Debtors have consented to the automatic modification of the automatic stay to enable IPFS and/or third parties, including insurance companies providing the coverage under the
6 7
The coverage period for the Policies began on November 1, 2010 and extends through October 31, 2011. In the ordinary cause of business and in accordance with the Insurance Order, Innkeepers has made the down payment and the first of the monthly payments.
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Policies, to take all steps necessary and appropriate to cancel the Policies, collect the Collateral, and apply the Collateral to the indebtedness owed to IPFS by Innkeepers in accordance with the Security Interest. In exercising such rights, however, IPFS and/or third parties will be required to comply with the notice and other relevant provisions of the PFA. The Debtors submit that the granting of the liens in accordance with this Motion does not violate the terms of either of their two debtor-in-possession financing facilities,8 nor does it violate the terms of the final cash collateral order.9 12. The Debtors believe the terms of the PFA, including the granting of the Security
Interest, are commercially fair and reasonable and represent the best such financing available. In light of the importance of maintaining insurance coverage with respect to their business activities and preserving liquidity by financing certain of the insurance premiums under the Policies, the Debtors believe it is in the best interests of their estates to receive the Courts approval for Innkeepers to enter into the PFA. Basis for Relief 13. As discussed above, the Debtors believe the Court already has approved
Innkeepers entry into the PFA in the Insurance Order, and the Debtors are seeking the relief requested herein out of an abundance of caution and based on the requirement from IPFS. Innkeepers entry into the PFA is appropriate under section 363 of the Bankruptcy Code. Courts
8
See Exhibit 1 to the Final Order Authorizing the Debtors to Obtain Postpetition Senior Secured Super-Priority Debtor-In-Possession Financing From Five Mile Capital II Pooling International LLC Pursuant to 11 U.S.C. 105, 361, 362, 364(c), 364(d) and 364(e) [Docket No. 400] at 5.02(a); Final Order Pursuant to Bankruptcy Code Sections 105, 361, 362, 363, 364 and 507 (I) Authorizing Floating Rate Debtors to Obtain Postpetition Financing and (II) Granting Liens and Super-Priority Claims [Docket No. 385] and Exhibit B to the Supplement to the Debtors Motion for the Entry of an Order Authorizing the Debtors to Obtain Postpetition Financing from an Affiliate of Lehman Ali Inc. on a Priming Basis Pursuant to Sections 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the Bankruptcy Code [Docket No. 200] at 5.2.1. See Final Order Authorizing the Debtors to (i) Use the Adequate Protection Parties Cash Collateral and (ii) Provide Adequate Protection to the Adequate Protection Parties Pursuant to 11 U.S.C. 361, 362, and 363 [Docket No. 402].
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approve transactions under section 363(b) of the Bankruptcy Code using a business judgment standard. See, e.g., In re Lionel Corp., 722 F.2d 1063, 1070 (2d Cir. 1983) (noting that under normal circumstances, courts defer to a trustees judgment concerning use of property under section 363(b) when there is a legitimate business justification); Meyers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir. 1996) (same). A debtor has the burden of establishing that a valid business purpose exists for the use of estate property in a manner outside the ordinary course of business. See Lionel Corp., 722 F.2d at 1071. 14. Entry into the PFA is a valid exercise of the Debtors business judgment. The
PFA provides numerous benefits to the Debtors, including the ability to preserve liquidity and manage their cash flow by financing certain of the insurance premiums under the Policies at a reasonable rate. As discussed in the motion to approve the relief granted in the Insurance Order, Innkeepers has entered into premium financing agreements similar to the PFA in the past due to the benefits they provide. Since the coverage period under the Policies began on November 1, 2010 (and the coverage period under the Debtors previous policies ended on October 31, 2010), IPFS has extended Innkeepers credit for a short period of time to permit Innkeepers to bind the Policies to avoid any lapse in coverage. In the event that Innkeepers does not obtain the relief sought in this Motion, IPFS has asserted that they will no longer extend credit to finance the Policies. This would force Innkeepers to obtain replacement financing on an expedited basis (and likely at greater expense, if replacement financing is available at all) in order to maintain the Policies without having to pay the entire annual premiums now or risk a lapse in coverage. Because the terms of the PFA are commercially fair and reasonable and because the ability of Innkeepers to finance the premiums for their insurance coverage benefits the Debtors estates,
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entry into the PFA by Innkeepers is supported by valid business purposes and appropriate under section 363(b). 15. Further, sufficient cause exists for the Court to authorize Innkeepers to grant the
Security Interest. Section 364 provides, in relevant part, [i]f the [debtor] is unable to obtain unsecured credit . . . , the court, after notice and a hearing, may authorize the obtaining of [secured] credit or the incurring of [secured] debt . . . 11 U.S.C. 364(c). Section 364 authorizes a debtor, in the exercise of its business judgment, to incur secured debt if the debtor has been unable to obtain unsecured credit and the borrowing is in the best interests of the estates. See, e.g., In re Mastercraft Interiors, Ltd., Case Nos. 06-12769, 06-12770, 2006 WL 4595946, at *4 (Bankr. D. Md. Aug. 10, 2006) (authorizing the debtors incurrence of secured financing because the debtors financing needs were immediate and critical to the success of the proceedings and the debtor was unable to obtain unsecured credit); In re Budget Group, Inc., Case No. 02-12152, 2002 Bankr. LEXIS 1050 (Bankr. D. Del. Aug. 1, 2002) (court authorized funding of acquisition of property on a secured basis where acquired property was necessary to maintain operations and debtors could not obtain such funding on an unsecured basis); In re Ames Dept. Stores, 115 B.R. 34, 38 (Bankr. S.D.N.Y. 1990) (with respect to postpetition credit, courts permit debtors-in-possession to exercise their basic business judgment consistent with their fiduciary duties). Generally, lenders are unwilling to finance insurance premiums on an unsecured basis. Further, section 364(c) does not impose a duty on the debtor to request
unsecured credit from every potential lender before seeking secured credit. See In re Snowshoe Co., Inc., 789 F.2d 1085, 1088 (4th Cir. 1986). 16. Courts in this and other jurisdictions have approved relief similar to the relief
requested in this Motion with respect to premium financing agreements. See, e.g., Insurance
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Order at 4; Mark IV Indus., Inc., Case No. 09-12795 (Bankr. S.D.N.Y. May 27, 2009) [Docket No. 163]; In re Charter Commcns, Inc., Case No. 09-11435 (Bankr. S.D.N.Y. Apr. 15, 2009) [Docket No. 191]; In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. Apr. 13, 2009) [Docket No. 179]; In re Tronox Inc., Case No. 09-10156 (Bankr. S.D.N.Y. Feb. 6, 2009) [Docket No. 141]; In re Lyondell Chem. Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 8, 2009) [Docket No. 75]; In re Lenox Sales, Inc., Case No. 08-14679 (Bankr. S.D.N.Y. Dec. 16, 2008) [Docket No. 125]; In re Wellman, Inc., Case No. 08-10595 (Bankr. S.D.N.Y. Feb. 26, 2008) [Docket No. 40]; In re Musicland Holding Corp., Case No. 06-10064 (Bankr. S.D.N.Y. Feb. 1, 2006) [Docket No. 341]; In re Calpine Corp., No. 05-60200 (Bankr. S.D.N.Y. Jan. 4, 2006) [Docket No. 267].10 17. For the reasons set forth herein, Innkeepers should be authorized to enter into the
PFA and grant the Security Interest. Motion Practice 18. This Motion includes citations to the applicable rules and statutory authorities
upon which the relief requested herein is predicated and a discussion of their application to this Motion. Accordingly, the Debtors submit that this Motion satisfies Rule 9013-1(a) of the Local Rules for the United States Bankruptcy Court for the Southern District of New York. Waiver of Bankruptcy Rule 6004(a) and 6004(h) 19. To implement the foregoing successfully, the Debtors seek a waiver of the notice
requirements under Bankruptcy Rule 6004(a) and the 14-day stay of an order authorizing the use, sale, or lease of a property under Bankruptcy Rule 6004(h).
10
Because of the voluminous nature of the orders cited herein, the orders are not attached to the Motion. Copies of these orders are available on request of Debtors counsel.
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The Debtors Reservation of Rights 20. Nothing in the Motion or the Order, nor as a result of the Debtors payment of
claims pursuant to the Order, shall be deemed or construed as: (a) an admission as to the validity or priority of any claim against the Debtors; (b) a waiver of the Debtors rights to dispute any claim; or (c) an approval or assumption of any agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code. Notice 21. The Debtors have provided notice of this Motion to: (a) the entities on the Master
Service List (as such term is defined in the Notice, Case Management, and Administrative Procedures [Docket No. 68]), which is available at www.omnimgt.com/innkeepers, the website maintained by Omni Management Group, LLC, the Debtors notice and claims agent; and (b) IPFS. The Debtors respectfully submit that no further notice is necessary. No Prior Request 22. Other than the motion to approve the relief granted in the Insurance Order, no
prior request for the relief sought in this Motion has been made to this or any other court.
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WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto as Exhibit A, granting the relief requested herein and granting such other relief as is just and proper.
/s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta 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
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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered
ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A PREMIUM FINANCING AND SECURITY AGREEMENT WITH IPFS CREDIT CORPORATION1 Upon the motion (the Motion)2 of the Debtors, as debtors and debtors in possession (collectively, the Debtors), for the entry of an order (this Order) (a) authorizing the Debtors to (i) enter into the PFA and (ii) grant the Security Interest and (b) granting such other relief as is just and proper; it appearing that the relief requested is in the best interests of the Debtors estates, their creditors, and other parties in interest; the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b); venue being proper before this court pursuant to 28 U.S.C. 1408 and 1409; notice of the Motion having been adequate and appropriate under the circumstances; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted to the extent provided herein.
The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors 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 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. All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Motion.
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2.
Innkeepers is authorized to enter into the PFA. To the extent that the PFA differs
from this Order, this Order shall control. 3. Innkeepers is authorized to timely make all payments due under the PFA, and
IPFS is authorized to receive and apply such payments to the indebtedness owed by Innkeepers to IPFS as provided in the PFA. 4. Pursuant to section 364(c) of the Bankruptcy Code and the terms of the PFA,
Innkeepers is authorized to grant to IPFS a first priority security interest in the Policies for (but only to the extent permitted by applicable law) (a) any return of premiums or unearned premiums under the Policies and (b) any dividends that may become due to the Debtors in connection with the Policies (collectively, the Security Interest). 5. In the event that returned or unearned premiums or other amounts due under the
Policies are insufficient to pay the total amount owing by Innkeepers to IPFS under the PFA, any remaining amount owing to IPFS, including reasonable attorneys fees and costs in accordance with the PFA, shall be an allowed claim in the Chapter 11 Cases with priority as an administrative expense pursuant to section 503(b)(1) of the Bankruptcy Code. 6. Notwithstanding anything to the contrary contained in any order approving
secured financing in the Chapter 11 Cases, the Security Interest granted to IPFS hereunder in connection with the Policies shall be senior to any security interests and/or liens granted to any other secured creditors in the Chapter 11 Cases. 7. Because IPFS has extended credit to the Debtors in good faith, the reversal or
modification of this Order on appeal shall not affect the validity of the debt owed to IPFS or the priority of its liens, as provided in section 364(e) of the Bankruptcy Code.
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8.
If the Debtors do not timely make any of the payments due under the PFA as they
become due (subject to any applicable cure period under the PFA and all other terms of the PFA), the automatic stay shall automatically modify solely to enable IPFS and/or third parties, including insurance companies providing the coverage under the Policies, to take steps necessary and appropriate to cancel the Policies, collect the Collateral, and apply such Collateral to the indebtedness owed to IPFS by the Debtors in accordance with the Security Interest. In
exercising such rights, IPFS and/or third parties must comply with the notice and other relevant provisions of the PFA. 9. The Debtors are authorized, but not directed, to enter into new premium financing
and security agreements on an as-needed basis with an entity providing insurance premium financing, including IPFS, during the postpetition period without further Court approval. 10. The terms and conditions of this Order shall be immediately effective and
enforceable upon its entry. 11. All time periods set forth in this Order shall be calculated in accordance with
Bankruptcy Rule 9006(a). 12. The Debtors are authorized to take all actions necessary to effectuate the relief
granted pursuant to this Order in accordance with the Motion. 13. This Court retains jurisdiction with respect to all matters arising from or related to
the implementation of this Order. New York, New York Dated: ___________, 2010 United States Bankruptcy Judge
3
K&E 17945123
EXHIBIT B PFA
K&E 17945123
877- 902-4242 101 Hudson Street, Jersey City, NJ 07302 1001 Winstead Drive, Suite 500, Cary, NC 27513 45 East River Park Place West, Suite 308, Fresno, CA 93720
$ $ BORROWER / INSURED (The Insured) (Name, Address and Telephone Number) Acct. No.
A
B
TOTAL PREMIUMS CASH DOWN PAYMENT REQUIRED AMOUNT FINANCED (The Amount of Credit Provided to Insured or on its behalf) FINANCE CHARGE (Dollar amount credit will cost)
3,338,486.00 1,168,363.26
Innkeepers USA Trust Island Hospitality Management Inc 50 Coconut Row Ste 200 Palm Beach
E-Mail Address (optional): (Cost of Credit figured as a yearly rate)
2,170,122.74
FL
33480
5612271326
25,103.72 2,450.00
TOTAL PAYMENTS (Amounts which will have been paid after making all scheduled payments)
2,197,676.46
313,953.78
12/01/2010
06/01/2011
AGENT OR BROKER Arthur J Gallagher Risk Management Services, Inc. BUSINESS ADDRESS 1900 W Loop So Ste 1600 Houston TEL. NO./E-MAIL ADDRESS 713-623-2330 The Undersigned Agent or Broker: 1. Represents and warrants as follows: (a) to the best of the undersigneds knowledge and belief, the Insureds signature is genuine or, to the extent permitted by applicable Law, the undersigned Agent or Broker has been authorized by the Insured to sign this Agreement on their behalf, (b) the Insured has received a copy of this Agreement, (c) the scheduled Policies are in full force and effect and the premiums indicated therefore are correct, (d) the Insured may cancel all scheduled Policies immediately upon request, (e) none of the Policies scheduled in the Agreement are non-cancelable, and (f) the down payment as indicated in Box B and installments totaling ______________ have been collected and are being retained by us. 2. Upon cancellation of any of the scheduled Policies, the undersigned Agent or Broker agrees upon demand to pay to LENDER or its assigns their commission on any unearned premiums applicable to the cancelled Policies. THE AGENT OR BROKER AGREES TO THE PROVISIONS ABOVE AND ON PAGE 3 TX 77027
of
4.
5. 6. 7.
8.
16. 17. 18. 19. 20. 21. 22. 23. 24. 25.
26. Formation of Agreement: Any electronic signature or electronic record may be used in the formation of this Agreement, and the signatures of the Insured and Agent and the record of this Agreement may be in electronic form (as those terms are used in the Uniform Electronic Transactions Act). A photocopy, a facsimile or other paper or electronic record of this Agreement shall have the same legal effect as a manually signed copy.
ICC FL (3/10)
Page
of
Place (X) If Not Authorized (See #3 below) Policy Number and Prefix (itemized)
Full Name of Insurance Company and Name and Address of Policy Issuing Agent or Company Office To Which Premium is Paid and Notices are Sent
Audit Info*
Earn % Minimum
C: Fidelity and Deposit Co of MD C: Lloyd's of London P: Hiscox, Inc. C: New Hampshire Ins Co C: New Hampshire Ins Co C: Insurance Co of the State of PA C: Insurance Co of the State of PA C: Commerce and Industry Ins Co C: Lloyd's of London
12 12 12 12 12 12 12
72,750.00 11,083.00 587.00 454,612.00 2,617.00 9,538.00 88,023.00 362.00 76,568.00 214,850.00 6,446.00 195,000.00 195.00 9,750.00 1,950.00 18,500.00 19.00 925.00 185.00 51,288.00 7,936.00 1,920,302.00 195,000.00
Surcharge Fee LQL :0 0.00 AUT :0 A 0.00 Surcharge Fee WMC :0 A 0.00 UMB :0 0.00 Surcharge Fee EPL :0 25.00 Stamp Tax State Tax Surcharge Fee PL :0 25.00 Stamp Tax State Tax Surcharge Fee XSL :0 0.00 WMC :0 A 0.00 WMC :0 A 0.00 Brokers Fee
C: Lloyd's of London
12
11/01/2010
C: Fireman's Fund Insurance Co C: Commerce and Industry Ins Co C: National Union Fire Ins Co PA
12 12 12
Agent or Broker has or will receive compensation from Lender for services rendered to Lender in connection with the preparation and presentation of the premium finance agreement.
3,338,486.00
5. 6. 7. 8. 9.