Cerberus Capital Management LP and Chatham Lodging Trust are set to face an October 10 trial with Innkeepers USA Trust, who is suing the two companies for terminating a $1.12 billion deal to purchase 64 hotels.
In the suit, Cerberus and Chatham are alleged by Innkeepers to have terminated the deal as a negotiating tactic for a lower price on the properties. Innkeepers argues that the buyers must finalize the deal as agreed or pay substantial damages. Cerberus said the lawsuit is without basis.
Cerberus and Chatham said in a joint statement given to members of the press that “the sponsors have asserted that a material adverse effect as defined in the definitive documents has occurred. The sponsors will establish the basis for their position in an appropriate manner. In addition, the bid procedures approved by the bankruptcy court provide that in the event the contract is terminated other than as permitted by the contract, the sole and exclusive remedy for the company is to retain the sponsors’ US$20 million deposit. As a result, the company has no basis to seek either specific performance or damages beyond the deposit.”
Cerberus said the purchase, a joint venture between it and Chatham Lodging Trust, was terminated in accordance with a clause in the buyout contract allowing the deal to be scuttled “as a result of the occurrence of a condition, change or development that could reasonably be expected to have a material adverse effect on Innkeepers’ business.”
In a hearing at the U.S. Bankruptcy Court – Southern Distrct of New York on Wednesday, an attorney for Innkeepers told the court, “Cerberus to date has been unable to tell us what the material adverse effect is. There has been none.”