10000004073

Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
VERITEXT REPORTING COMPANY www.veritext.com
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Case No. 10-13800-scc - - - - - - - - - - - - - - - - - - - - -x In the Matter of:
INNKEEPERS USA TRUST, et al.,
Debtors.
- - - - - - - - - - - - - - - - - - - - -x
United States Bankruptcy Court One Bowling Green New York, New York
November 10, 2010 10:16 AM
B E F O R E: HON. SHELLEY C. CHAPMAN U.S. BANKRUPTCY JUDGE
212-267-6868
516-608-2400
Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 [219] Motion of Best Western International to Limit Debtors' Time to Assume or Reject Executory Contract [587] Debtors' Motion for Entry of an Order Pursuant to Section 363 of the Bankruptcy Code (I) Approving the Debtors' Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson, LLP as Counsel to the Independent Committee of the Board of Trustees of Innkeepers USA Trust and Authorizing the Payment of Such Compensation by the Debtors and (II) Authorizing the Debtors to Compensate the Members of the Independent Committee [610} Motion to Extend Exclusivity Period for Filing a Chapter 11 Plan and Disclosure Statement/Debtors Motion for Entry of an Order Extending the Exclusive Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof and Omnibus Objection to Motions to Terminate Exclusivity [601] Motion for Judgment [607] Debtors' Motion for an Order Extending Time Within Which the Debtors Must Assume or Reject Unexpired Leases of Nonresidential Real Property
212-267-6868
516-608-2400
Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transcribed by: Ellen S. Kolman [586] Notice of Hearing (related doc(s) 324, 414, 574 by Gareth Tooly [601]Notice of Hearing on Preferred Shares C 8.0% by Gareth Tooly [669] Motion to Compel Apollo Investment Corporation to Produce Documents in Response to the Committees' Subpoena for Rule 2004 Examination
212-267-6868
516-608-2400
Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: PAUL BASTA, ESQ.

A P P E A R A N C E S : KIRKLAND & ELLIS LLP Attorneys for Debtor 300 North LaSalle Chicago, IL 60654
BY:
ANUP SATHY, P.C., ESQ. MARC J. CARMEL, ESQ.
KIRKLAND & ELLIS LLP Attorneys for Debtor 655 Fifteenth Street, N.W. Washington, DC 20005
BY:
DANIEL T. DONOVAN, ESQ.
KIRKLAND & ELLIS LLP Attorneys for Debtor 153 East 53rd Street New York, NY 10022
212-267-6868
516-608-2400
Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: BRIAN E. GREER, ESQ. DECHERT LLP Attorneys for Lehman ALI Inc., and Michael Lascher 1095 Avenue of the Americas New York, NY 10036 BY: LAWRENCE P. GOTTESMAN, ESQ. BRYAN CAVE LLP Attorneys for LNR Partners, LLC 1290 Avenue of the Americas New York, NY 10104 BY: LORENZO MARINUZZI, ESQ. MORRISON & FOERSTER LLP Attorneys for Official Committee of Unsecured Creditors 1290 Avenue of the Americas New York, NY 10104
212-267-6868
516-608-2400
Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: LENARD M. PARKINS, ESQ. HAYNES AND BOONE LLP Attorneys for Midloan Loan Services, Inc. One Houston Center 221 McKinney Street Houston, TX 77010 BY: BONNIE STEINGART, ESQ. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP Attorneys for Independent Committee for Board of Trustees One New York Plaza New York, NY 10004 BY: MARTIN BIENENSTOCK, ESQ. DEWEY & LEBOEUF LLP Attorneys for the Ad Hoc Committee of Preferred Equity Holders 1301 Avenue of the Americas New York, NY 10019
212-267-6868
516-608-2400
Page 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
HAYNES AND BOONE LLP Attorneys for Midland Loan Services, Inc. 201 Main Street Suite 2200 Fort Worth, TX 76101
BY:
JOHN D. PENN, ESQ.
THE HELMS LAW FIRM, PLC Attorneys for Best Western International 2600 N. Central Avenue Suite 940 Phoenix, AZ 85004
BY:
MICHAEL G. HELMS, ESQ.
212-267-6868
516-608-2400
Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP Attorneys for Five Mile Capital 1633 Broadway New York, NY 10019
BY:
ADAM L. SHIFF, ESQ. DANIEL A. FLIMAN, ESQ.
KILPATRICK STOCKTON LLP Attorneys for Trimont Real Estate Advisors 1800 Peachtree Street, NE Suite 2800 Atlanta, GA 30309
BY:
TODD C. MEYERS, ESQ.
212-267-6868
516-608-2400
Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: LEE S. ATTANASIO, ESQ.

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP Attorneys for Apollo Investment Corporation 1285 Avenue of the Americas New York, NY 10019
BY:
ALAN W. KORNBERG, ESQ. LAUREN SHUMEDJA, ESQ. ANDREW J. EHRLICH, ESQ.
PERKINS COLE LLP Attorneys for C-III and CW Capital 131 South Dearborn Street Suite 1700 Chicago, IL 60603
BY:
DAVID NEFF, ESQ. (TELEPHONICALLY)
SIDLEY AUSTIN LLP Attorneys for Appaloosa Investment LP, et. al. 787 Seventh Avenue New York, NY 10019
212-267-6868
516-608-2400
Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
ALSO PRESENT: GARETH TOOLEY, Pro Se, (TELEPHONICALLY) 7259 U.S. Highway 11 Potsdam, NY 13676
212-267-6868
516-608-2400
INNKEEPERS USA TRUST, et. al.

Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Pause) THE COURT: All right. While we're waiting for Mr. Can I take now. THE COURT: MR. DONOVAN: I recognize them. They will be in momentarily. The classic empty chair. THE CLERK: THE COURT: MR. DONOVAN: P R O C E E D I N G S The matter of Innkeepers USA Trust. Good morning. Good morning, Your Honor. I'm here with
my partners, Anup Sathy and Paul Basta -THE COURT: MR. DONOVAN: I see them. -- who are right outside the hall right
UNIDENTIFIED SPEAKER: THE COURT:
They still haven't recovered from the last
time we were all together. MR. DONOVAN: THE COURT: MR. DONOVAN: Yes, that's right, Your Honor. What are we doing? As soon as Mr. Sathy comes in, I could
play the role but probably not as well. Your Honor, Dan Donovan for the debtors. I think
first on the agenda is a few unopposed motions and then its exclusivity which I know Mr. Sathy is going to address. THE COURT: All right.
Sathy, let's find out who's on the phone.
appearances of the folks on the phone please?
212-267-6868
516-608-2400

Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you. (Recess from 10:07 a.m. to 10:13 a.m.) THE COURT: MR. DONOVAN: THE COURT: who's on the phone. THE CLERK: I know it's Mr. Sathy's fault, right? Always. Always. Operator? Excuse me, CourtCall operator, can you All right. Let's check to see be great. THE COURT: sort out the phone. MR. DONOVAN: THE COURT: Okay. Thank you, Your Honor. Thank All right. That will give us some time to morning. Well, Your Honor, during the quiet, while I just -THE COURT: MR. DONOVAN: You want to tell jokes? Yes, right. Thank you, thank you. (No response) MR. DONOVAN: Well, that was easy, Your Honor, this
What we -- I just heard that Mr. Sathy is requesting a ten minute recess because we're trying to work out something before we start. THE COURT: MR. DONOVAN: THE COURT: MR. DONOVAN: Oh, is that true? I apologize. Okay. -- if we could have ten minutes, that'd He just came out and --
We'll come back in ten minutes.
212-267-6868
516-608-2400

Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to -MR. SATHY: THE COURT: MR. SATHY: THE COURT: I think -It's all those people. Yes. All right. Why don't I ask you if you tell us who's on the phone please? THE OPERATOR: THE COURT: MR. SATHY: THE COURT: MR. SATHY: Yes, Gareth Tooly and David Neff. Very well.
All right.
Morning, Your Honor. Good morning. Anup Sathy from Kirkland. I'm here with
Paul Basta and Dan Donovan my partners.
Your Honor, we have
six matters set for the hearing today and, Your Honor, I believe the debtors have requested a short chamber's conference to update Your Honor on some of the developments of last night, particularly exclusivity. THE COURT: MR. SATHY: THE COURT: All right. If Your Honor would indulge us. Can you identify the group that wants
could indulge me, if we could -- I'm happy to do that, but we've got Mr. Tooly on the line. MR. SATHY: THE COURT: Oh, of course, of course. So, if we could take care of that matter
and enable him to disconnect so that he doesn't incur CourtCall costs, I think that would be --
212-267-6868
516-608-2400

Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sir? MR. SATHY: THE COURT: I think that makes a lot of sense. -- a good idea.
Mr. Tooly, sir, are you there? MR. TOOLY: THE COURT: Yes, I am. This is Gareth Tooly. This is Judge Chapman. You're here with a room
All right, sir.
You're connected into my courtroom.
full of attorneys and I'm going to give you an opportunity briefly to present your issue and I have read the materials that you submitted and that were filed on the docket of the court. And have you had an opportunity to read the response
that was filed by the Paul Weiss law firm on behalf of Apollo and also the response that was filed by the Kirkland law firm on behalf of the debtors? MR. TOOLY: I have to be truthful, no, I didn't read
it because I just had one thing I wanted to -- in my mind. Okay? THE COURT: Okay. Why don't you state that for us,
And what we're going to do is I'm going to allow Mr.
Sathy, who is one of the attorneys from Kirkland & Ellis, respond to your arguments because I think once you hear the response, and we'll arrange to send you copies, I think this will become clearer to you. So, if you want to state your
issue for us, why don't you go ahead? MR. TOOLY: Okay. Well, Your Honor, this is Gareth
Tooly, okay, and before I get started, I'd like to ask the
212-267-6868
516-608-2400

Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 lawyers of Apollo to tell Apollo to get a hold of a securities lawyer to see if their symbol, AINV, should have a V symbol at the end of it. suffix. THE COURT: Mr. Tooly, there are attorneys for Apollo V is something new. It's a (indiscernible)
present in the courtroom so they're listening to what you're saying. MR. TOOLY: Okay. That's fine. The suffix V is a new Okay. I'll get
for corporate reorganization (indiscernible). to what I'm trying to say now. Your Honor, this is Gareth Tooly.
I'd like to make --
I'd like you to make a ruling on Innkeepers preferred C (indiscernible). One, to the preferred C, the Apollo's debt
because of the bankruptcy, Innkeepers' bankruptcy or two, and Innkeepers bankruptcy code. Now, I'd like to go to docket 574 and later docket 324 and docket 414. THE COURT: All right. I have all of the docket items
that you refer to and attorneys for the debtors and Apollo have those as well. So, I think that they're prepared to respond
and explain to you the answer to your question and also what your rights are with respect to this bankruptcy. MR. TOOLY: THE COURT: Okay. You're first going to hear from Mr. Sathy
from Kirkland & Ellis who is one of the attorneys for the
212-267-6868
516-608-2400

Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 debtors. MR. SATHY: Good morning, Mr. Tooly. The preferred
shares that you hold have been issued by an entity called Innkeepers USA Trust. Innkeepers USA Trust is one of the As a debtor, all of
debtors in these Chapter 11 proceedings.
its claims against it and interest in it are subject to the Court and the bankruptcy process and as a holder of preferred C shares those shares are part of the Chapter 11 process. The debtors are working with holders of Series C preferred shares as well as an ad hoc committee of preferred shareholders. With respect to our overall plan process, your
Series C preferred shares will be addressed as part of that plan process like all other holders of preferred C shares. part of that plan process, you as a party in interest, will have rights to understand, respond and object to any proposed treatment and ultimately any treatment or distribution or recovery on account of your shares will have to be approved by this Court. THE COURT: So, Mr. Tooly, and there are attorneys who As
have appeared in the case who are acting with respect to parties who hold the same security as you do and Mr. Sathy's just explained the process. But the response that Apollo
submitted, which I encourage you to read, also explains your very technical point which I commend you for ferreting out and that's the question of who assumed the liability and what the
212-267-6868
516-608-2400

Page 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 surviving entity is. And what you learn when you practice
corporate law is that you have to follow the definitions in these agreements. And what Apollo points out is that if you
follow the definitions, the surviving entity is Innkeepers. It's not AIC. So that when you look at that document it would
appear, as you observed, that it looks like AIC assumed the debt. But that, in fact, is not the case. The acquisition was
accomplished through an acquisition vehicle which was subsequently changed its name to Innkeepers USA Trust. And
this is very clearly and succinctly laid out in the response that was filed by AIC. So, with respect to your ongoing rights as a holder of the preferred C shares, to the extent that you hold those shares and that there's a recovery for those shares at the outcome of this bankruptcy you would be entitled to your share of whatever that recovery is. MR. TOOLY: THE COURT: Okay. All right? And I understand from my law If that's
clerk that you have gotten copies of the responses.
not the case, you can contact my chambers and we'll get copies to you. MR. TOOLY: THE COURT: your participation. Okay. All right? Thank you, sir. I appreciate
You can disconnect now, otherwise you're
welcome to stay on the line and listen to the hearing which
212-267-6868
516-608-2400

Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 will resume in a little while. MR. TOOLY: THE COURT: MR. TOOLY: MR. SATHY: THE COURT: MR. SATHY: Okay. That's your choice.
I guess I'll hang up. Have a good day. Bye.
All right. Thank you.
Thank you, Your Honor. Okay. So, can we go off the record --
I'm think that would be great and if we
could -- obviously, the maximum -- possibility limit the number of folks from each firm or each group of creditors that would be great. THE COURT: All right. I'll leave that to you. I'm
sure you can figure it out. MR. SATHY: (Pause) THE COURT: MR. DONOVAN: THE COURT: Okay.
I'll meet you in the back room.
Thank you.
Thank you, Your Honor. All right. Thank everyone in the
courtroom for your patience. MR. DONOVAN: After discussions and the Court's
assistance and the discussion among the parties, we've reached a resolution to the exclusivity motion; I'd like to state that on the record at this point. THE COURT: MR. DONOVAN: All right. The agreement is to extend exclusivity
for the debtors for seventy-five days that is to approximately
212-267-6868
516-608-2400

Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 January 31st. As explained in the papers, the debtors have
started and will continue its process as broadly identified in the board presentations that were attached to the debtors' motion to extend exclusivity. Specifically, the debtors'
process will solicit proposals for interest on an enterprise level restructuring which seeks to maximize value to all of the debtors' creditors and stakeholders. As set forth in Mr.
Derrough's declaration, any proposal or proposals that will maximize value will be considered. Moelis is the sole banker
conducting the restructuring process but constituents are encouraged to forward to Moelis and the debtors any party that may be interested in bidding on the entire enterprise, the fixed rate pool, the floating rate pool, or other properties. This agreement would be, obviously, without waiver of any party to file any future motion. exclusivity. Your Honor. THE COURT: All right. Does anyone wish to add Mr. Bienenstock? Our understanding So, that's with respect to
Mr. Basta will address the Fried, Frank motion,
anything with respect to exclusivity? MR. BIENENSTOCK:
Yes, Your Honor.
is that any party including specifically the ad hoc preferred shareholders' committee can find potential investors and all or any amount less than all of the properties to forward them to Mr. Derrough to get access to the data room on the properties they are interested in. If they're qualified to do the
212-267-6868
516-608-2400

Page 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 transaction they are interested in they should be given the information on those hotels and if they're not, our understanding is we can call the Court for a chambers or telephone conference. MR. DONOVAN: Your Honor, the one point I don't
believe was agreed to was it was a little unclear what Mr. Bienenstock was saying: properties. finding bidders and then also on which
I believe the discussion and the agreement was by
pool and that would include those seven properties but not devolving into some other process that was raised as a concern. So, I just want that to be clear, Your Honor. But it is true that Mr. Derrough will take calls and constituents are encouraged to forward people to Mr. Derrough. MR. BIENENSTOCK: Your Honor, I don't recall any
restriction to calls but suffice it to say if someone asked for the information on the whole pool, nothing prevents them from making an offer for less than the whole pool, so it may be a semantic difference. THE COURT: MR. DONOVAN: I think this is a semantic difference. I think it is. And Mr. Derrough will
take the calls and we can entrust it from there, Your Honor. THE COURT: He certainly agreed that to be. And Mr.
Derrough confirmed when we spoke in chambers that fastidious records will be kept of all inquiries whether they come through one of the parties in this case or whether they come through
212-267-6868
516-608-2400

Page 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the process that Moelis is conducting. And to the extent that
there are issues, I've made it clear that I'm available to help resolve those issues. MR. DONOVAN: THE COURT: Thank you, Your Honor. So, with that, just one of the objecting All
parties needed an opportunity to speak to their client. right. of.
I'm getting an indication that that's been taken care
Mr. Meyers? MR. MEYERS: Yes, just quickly, on the fastidious
records of who is being allowed in and who is not being allowed in that would be communicated to the other parties in interest so that we know who wasn't allowed to do due diligence or make bids or whatever. THE COURT: Yes. I'm not going to direct that Mr.
Derrough call you every day and tell you who but when you ask the question you can certainly receive an update. MR. MEYERS: THE COURT: MR. DONOVAN: good point. Thank you, Your Honor. Hold on one second. Your Honor, Mr. Derrough raised a very
It is -- one is with this potential additional
individuals, they have to live up to the letter and the spirit of the confidentiality so this process is kept intact. THE COURT: MR. DONOVAN: understands that. Absolutely. So, we just want to make sure everyone
212-267-6868
516-608-2400

Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that. THE COURT: I don't think anybody would disagree with
I'm not seeing anybody jump in to disagree. MR. DONOVAN: And that would mean not forwarding the
information as well. THE COURT: MR. DONOVAN: THE COURT: Right. Thank you, Your Honor. All right. Mr. Gottesman, did you have
something you wanted to add? MR. GOTTESMANN: Just brief remarks, Your Honor.
Obviously, and this is not to contradict but to supplement, obviously, one of the things that was discussed in chambers and that led us to this resolution was the commitment for an ongoing discussion and dialogue and communication and transparency and we obviously commend the debtors and its professionals on. We look forward to -- we, obviously, and our
advisors have a lot from this process and we assume that that dialogue will continue. THE COURT: Well, to quote someone and I'm sure he'll
recognize by the words, "You betcha." MR. GOTTESMANN: MR. BASTA: Thank you, Your Honor. I stand I
We agree with that, Your Honor.
up for just two things:
one is on the Fried, Frank motion.
think there's an understanding of the parties -THE COURT: Right. Mr. Basta, before you start on the
Fried, Frank motion, I did want to make a brief disclosure on
212-267-6868
516-608-2400

Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the record and it echoes the disclosure I made when we confirmed on the phone last week about a discovery matter that resolved itself. But with respect to Fried, Frank, I wanted to make the disclosure on the record that prior to taking the bench, I had the opportunity to work with members of the Fried, Frank firm on numerous matters over the course of my career and private practice. The individual attorneys who have been identified in
the Fried, Frank papers include Mr. Brad Scheler and Ms. Bonnie Steingart. I did work with Ms. Steingart on at least one large But more specifically
matter sometime in the last ten years.
with respect to Mr. Scheler, in addition to working with him on various matters I think it would be accurate to say that I developed a personal relationship, friendship, with him over the years including in the context of work that we did together on the board of directors of an organization called inMotion which is a nonprofit legal services organization that provides legal services to women and children in domestic situations including domestic violence cases. I served as the chairman of Mr.
the board of inMotion for three years ending in 2007.
Scheler served on the board during that time and, in fact, succeeded me as chair of the board of inMotion and he continues to serve in that role. So, notwithstanding my relationship with Mr. Scheler, I do believe that I can be impartial with respect to Fried,
212-267-6868
516-608-2400

Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Frank and their role in this case. And as is the case with
others of you with whom I may have had personal and professional relationships before this case, I will not communicate with Mr. Scheler during the duration of this case just the way I wouldn't communicate with anybody else in this case during the duration of this case other than passing pleasantries, if you will, when I happen to see you in the hall or elsewhere. So, as I've said when I've made previous disclosures, I'm not asking for a waiver, I'm not allowed to ask for a waiver under the rules but I do believe that I can continue to act and be impartial with respect to Fried, Frank's prospective role in this case. So, with that, if anybody has a question or concern, I'm happy to hear it. Fried, Frank retention. one raising their hand. MR. GOTTESMANN: Otherwise we can move forward with the All right, let the record reflect no All right, Mr. Gottesman, thank you. Okay. Thank you, Your Honor. I
think there's been discussions on the parties and I think parties want to proceed with the Fried, Frank motion by forgoing argument and just relying on the papers. THE COURT: Okay. As we indicated in our reply to the
MR. GOTTESMANN:
objections, we have agreed to certain modifications to the order on Fried, Frank whether they will submit fee applications
212-267-6868
516-608-2400

Page 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and file disclosures and the like. We have given, I think, to
the parties and the courtroom blacklines of the order but if anybody has not received it we're happy to take any comments they have and then submit an order to the Court for its consideration. THE COURT: All right. Thank you for that.
I have reviewed the revised order that was submitted and it does address some of the concerns that I have with -- it does stress the concerns that I have with respect to the application. So, therefore, I'm going to approve the
application and approve the compensation of Fried, Frank under Section 363. But Fried, Frank will be filing fee applications They will be continuing to And I
as if they were retained under 327.
make disclosures as if they were retained under 327. simply wanted to comment on the scope.
I noticed there were
some refinements as to the scope but that I will be very carefully scrutinizing the work that Fried, Frank does both in a substantive context and the context of continued plan discussions in these cases, issues surrounding exclusivity and also in the context of fees to ensure that Fried, Frank's work does not duplicate that of Kirkland. And I know that the
parties are very sensitive to keeping the cost down and I will be looking at Fried, Frank to be acting with the utmost of independence in its role advising the independent members of the board and acting as an additional safeguard, if you will,
212-267-6868
516-608-2400

Page 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that this process truly moves forward in the interest of all of the debtors and each of the debtors as we have said before. So, my eyes are very much trained on Fried, Frank. welcome them to the case. The hourly rates as I observed are I
high but I think it's a high level of advice that the independent members of the board are going to be looking for here. And I'm optimistic that Fried, Frank will add value to
this case in the sense of shortening it and, therefore, lowering the overall expense of the case. So, with that and if there are no other changes to the order, I'll approve the application on that basis. MR. BASTA: THE COURT: MR. BASTA: Thank you, Your Honor. All right. Your Honor, there's one matter that's not
on the agenda that I would like to raise before I hand Best Western over to Mr. Carmel, and that relates to the ad hoc committee of preferred shareholders. As the Court's aware, we are working with them and many of those preferred shareholders have signed onto the protective order and have been provided access to our data room and our confidential information. shareholders is growing. That group of preferred
And, for example, recently we were
approached with a preferred shareholder who had .8 percent of the preferred shares to get access to the data room. And we
don't yet have a disagreement with the ad hoc group but we do
212-267-6868
516-608-2400

Page 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have a concern of somebody buying a very small amount of preferred shares and then being provided access to the company's confidential information. And we also have asked of counsel to the preferred shareholders that as the group grows, management and its professionals and Moelis are up to their eyeballs in this case and trying to drive forward, we would like that follow-up questions regarding diligence and those items be coordinated among the group and then presented in a streamlined way so we're not in a position having to answer questions from each individual shareholder. So, we would hope to be able to work
that out with the committee and hopefully that will be that. THE COURT: Mr. Bienenstock? Yes, Your Honor. I -- if the debtor
MR. BIENENSTOCK:
is going to raise that, I feel compelled to put the ad hoc committee's response on the record. First, the preferred shareholders are shareholders of the holding company debtor. They have seen no evidence yet of
activity by the holding company debtor to maximize value to shareholders. The Lehman and Midland pools are under water by
their own admissions and yet no effort has been expended to provide value to the shareholders from the seven other properties, the cash, et cetera. Our committee is the only
entity protecting rights of any preferred shareholders. With today's resolution of the exclusivity motion, it
212-267-6868
516-608-2400

Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is not required that anyone own a single preferred share to get access to the data room if they're a qualified bidder and interested in making an offer. We have no basis to think that
any member of our group is asking for access to the data room for any information other than to maximize value to the preferred shareholders. And if the debtors have issues with We don't know why they felt
that, they should speak to us.
compelled to start this on the record but now that they did, I appreciate the opportunity to make our position clear. MR. BASTA: THE COURT: MR. CARMEL: THE COURT: MR. CARMEL: Thank you, Your Honor. Okay. Good afternoon, Your Honor. Good afternoon. There's actually -- the first matter on Marc Carmel.
the agenda was skipped for obvious reasons during this hearing but I didn't want it to leave us. So, the first matter is the motion to extend the deadline to assume or reject nonresidential real property leases. We filed the motion given the pending deadline in the There were no objections to that motion and
next week or so.
so I'm happy to provide the details but if you're not -- if you've read it then -THE COURT: MR. CARMEL: THE COURT: I've read it. - I'd ask the order be entered. There are no objections and I'm happy to
212-267-6868
516-608-2400

Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Western. claim. THE COURT: All right. A group of you want to leave? All right. Thank you. enter the order. MR. CARMEL: Thank you, Your Honor.
I believe the next matter on the agenda is matter number 5 which is the motion of Best Western. THE COURT: MR. HELMS: Yes. Your Honor, Michael Helms, appearing on
behalf of Best Western. THE COURT: podium, sir? MR. BIENENSTOCK: excused at this point? THE COURT: Certainly. We don't have an interest in this Your Honor, is it okay if we're All right. You want to come to the
MR. BIENENSTOCK:
All right, maybe just Mr. Bienenstock. Sir? MR. HELMS:
Good morning, Your Honor.
I think we're We have
sort of like a mat on the elephant in this proceeding.
one hotel affiliated with Best Western and that's in West Palm Beach. We have a -- Best Western -THE COURT: said Best Western. MR. HELMS: Best Western and also affiliated with Best One hotel affiliated with Innkeepers. You
There's one hotel that is a member of Best Western.
212-267-6868
516-608-2400

Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Best Western is a nonprofit corporation; operates a membership organization. It has no franchises, doesn't own any hotels,
doesn't lease any, doesn't operate any hotels, and it just operates a membership organization. themselves. We have a membership agreement that relates only to the hotel in West Palm Beach; one of the apparently seventy-two hotels involved in this proceeding. We need to know whether And It's run by the members
that membership agreement is to be assumed or rejected.
timing-wise, the problem is that that membership agreement terminates November 30th of this year; less than a month away, at the end of this month. It is -- it can be renewed by the debtor but the debtor has to pay its annual dues in order to renew it. If it
pays its annual dues that could easily -- that's going to raise all sorts of issues about whether that, in fact, is an assumption of the agreement. decision. Aside from that, there are -THE COURT: November 10th. MR. HELMS: THE COURT: the debtor. MR. HELMS: Well, we should have heard by September, November 10th. So, twenty days you're going to hear from Hold on. It's November -- what's today? So, we need to know that
212-267-6868
516-608-2400

Page 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 issue. actually. The requirements are that they pay the renewal It hasn't been done and I suspect in
membership in September.
this proceeding they could still do that by November 30 at least to get over that hump. The other problems that we have with this are that we can't enforce any of the requirements of the membership. We
can't enforce any of the design requirements, which are not in compliance, and we cannot enforce any of the quality requirements. THE COURT: MR. HELMS: requirements. Are you talking that they're in default? They are in default on the design
They're also in default on the payment of the They are in default of the --
membership fees, pre-petition. THE COURT: MR. HELMS: requirements.
They're in bankruptcy? Yes. They are in default of the design
And we have, I think, just as of last Thursday
or Friday also filed a motion for relief based upon that postpetition matter. I don't want to get into that; that's a different But we need to know that we filed this motion in
August; originally scheduled for hearing in September, and hopefully to know whether the assumption or rejection would occur before November 30. 30. THE COURT: All right. Mr. Carmel? But now we need to know by November
212-267-6868
516-608-2400

Page 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CARMEL: the record. The motion that was filed by Best Western cites as the reason and justification for the relief on, and I quote, "By reason of debtors' bankruptcy filing and imposition of the automatic stay." THE COURT: Well, that's not basis for the shortening Thank you, Your Honor. Mr. Carmel for
the time to assume or reject. MR. CARMEL: motion cited. And that's the entire basis that the
There's no law cited in the motion and no
explanation for how there's other prejudice. Clearly, the case law suggests, and in both this jurisdiction and most other jurisdictions that there's got to be a much higher standard before the 365(d)(4) deadline that provides that at any time before confirmation of the case would be shortened to some shorter time. And, in fact, the cases put
the burden on the moving party to establish a compelling reason. Here, Best Western hasn't provided a reason much less
a compelling reason except to say that they're affected by the bankruptcy and we'll be in this case for a long time. hearing a lot of parties with that same argument. I'm
The courts
have generally said that the power to compel the debtors to change the timing is rarely exercised and only if it's justified by the facts and circumstances; none of which are presented by Best Western today in their motion. There's a
212-267-6868
516-608-2400

Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 test -THE COURT: What was the answer -- let me interrupt
you -- what's the answer to the factual question, though, of what's going to happen on November 30th? MR. CARMEL: Do you know?
The fee, the annual fee to be paid, is
approximately 5,000 dollars, I believe. THE COURT: MR. CARMEL: Okay. And it's my understanding that the
debtors intend to pay that fee and that will not serve as an assumption. Obviously, we'd have to come before the Court
before any official assumption of an agreement. THE COURT: But it sounds like the contract is going
to terminate by its own terms on the 30th unless you pay the fee. MR. CARMEL: that would renew or -THE COURT: MR. CARMEL: Renew it? Right. Or result in a new agreement from Right. And we intend to pay the fee and
November 30th or December 1 going forward for a year. THE COURT: MR. CARMEL: Okay. And so, that we don't view as a
significant impediment or a rationale for compelling assumption or rejection of a contract. And, in fact, if it was actually
going to terminate in twenty days it would count against us assuming we're -- certainly against assuming it and it maybe
212-267-6868
516-608-2400

Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 against rejecting it. THE COURT: MR. CARMEL: Okay. Best Western has filed a motion to be
heard at the December 11th hearing, I believe, and that is to lift the automatic stay. There were more facts presented and
argument in that motion but, obviously, that's not before Your Honor today. THE COURT: MR. CARMEL: Right. In terms of the courts in this
jurisdiction have a multi-factor test to determine whether it's the kind of situation where modifying the timeline is appropriate, nonetheless Best Western doesn't provide any evidence to support why we should be compelled to assume or reject any earlier than confirmation. And certainly, as we put
forth in our objection, there are sufficient reasons and significant reasons why the debtor should not be compelled to assume or reject. In terms of making decisions, we've obviously been before Your Honor on several occasions over the last three or four months. If you look at both our motion and our reply with
respect to exclusivity as well as the issues that we put forth in the objection, we've been spending time on a lot of issues but most importantly we want to make sure that when we're making decisions with respect to executory contracts and leases that we're making those decisions not in the context of that
212-267-6868
516-608-2400

Page 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 single contract or lease, but in the context of the plan process which is ongoing and is, obviously, important to make sure that we're assuming those contracts that are valuable in the context of a plan or in the context of a reorganized enterprise and rejecting those contracts that are burdensome in that context. The debtors have approximately a thousand contracts in this case. Certainly, if we're in a situation where the
imposition of the automatic stay or the filing of the bankruptcy is justification for compelling the debtors to make assumption or rejection decisions, we may very well be before Your Honor frequently. And as much as we appreciate Your
Honor's time, I don't think that's going to be an appropriate use of the debtors' resources or the Court's resources. In light of the fact that Best Western hasn't provided any justification, much less a compelling justification and the debtors' have significant justifications for continuing their current deadline of and total confirmation of the case with respect to 365(d)(2), the debtors ask that you deny the motion and -- at this time. THE COURT: MR. HELMS: All right. Thank you. Anything further?
The motion talks about they're using our
trademarks without being required to comply with any of the requirements of the membership, not required to comply with any of the quality requirements, not being required to comply with
212-267-6868
516-608-2400

Page 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 any of the design requirements, that's the cause. Plus the
termination, the November 30 issue, and that's all in the motion. Those are the reasons that we're seeking a
determination of whether this debtor will assume or reject this membership agreement. THE COURT: Well, I think this motion is a motion to
shorten time for the debtor to assume or reject the executory contract. I don't believe that anything that you've identified
is materially different from any of the concerns that any other contract party would have in this Chapter 11 case or, frankly, in any other Chapter 11 case. The Chapter 11 by its nature imposes uncertainty and as a general matter, the debtors end up in Chapter 11 because they're short of funds or have other operational issues. it's not surprising to me that there are some issues and concerns that your client has with respect to this particular property. But this is one property in a constellation of And So,
properties that are owned and operated by these debtors.
you have not made a record upon which I can find that there's cause to shorten a period of time for the debtors to make a determination to assume or reject the contract. In addition, there have been assurances on the record today that, in fact, the fee is going to be paid and I'm afraid that this particular property will just have to bear with the uncertainty along with -- I think the number was a thousand
212-267-6868
516-608-2400

Page 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 an order? MR. CARMEL: Yes, Your Honor. We'll work to make sure perhaps -- other contract parties, until the debtor has a better handle on what its reorganization is going to look like. Certainly to the extent there are specific issues that are of concern to you, you can bring those to my attention in the context of the hearing on your other motion. But nothing I've
heard today provides a basis for me to compel the debtor or to shorten the time period in which the debtor has to assume or reject the contract. MR. CARMEL: THE COURT: All right? Thank you, Your Honor. I think we're done. Can somebody give me
that there's an order denying the motion. THE COURT: All right. Mr. Marinuzzi, right? MR. MARINUZZI: Correct, Your Honor. For the record, Just denying the motion, okay? I think we're done. Oh, we have one more,
Lorenzo Marinuzzi, Morrison & Foerster on behalf of the official committee of unsecured creditors. Your Honor, the committee filed on Friday and brought by order to show cause a motion to compel production by Apollo. We've had some delays outlined in the papers. I'm pleased to
report that yesterday Apollo and the committee agreed on a schedule for the production of hard copy documents and electronic documents and we delivered a copy of that
212-267-6868
516-608-2400

Page 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 stipulation to chambers. questions? stipulation. THE COURT: All right. I have a stipulation. It's I don't know if the Court has any
If not, we'd simply ask the Court to approve the
dated November 9th signed by both the parties.
It's a simple
two paragraph stipulation that sets forth the schedule for the completion of the production. MR. MARINUZZI: Correct. And the outside date, Your
Honor, is November 24th, 2010 which brings us to an issue that we've raised in our motion. We have currently a November 30th, 2010 deadline under the cash collateral order to assert any challenges to the liens and claims of the adequate protection parties. We don't
believe we're going to be done with the investigation in light of the late date of the Apollo production by that time. The order provides that the parties can agree to extend that date. We're going to reach out to each of the
parties covered by that order and hopefully they'll consent to a reasonable extension so we don't have to be back in front of the Court on a motion on an expedited basis before November 30th. THE COURT: All right. Well, I strongly encourage
everybody in the room to speak to Mr. Marinuzzi on that point. In light of the delay which has now been resolved through the stipulation, the committee can continue its work. But based on
212-267-6868
516-608-2400

Page 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 what I'm hearing, I really don't see the need to have to go through painful and expensive motion practice on that issue, particularly in light of the resolution on exclusivity that was reached in the earlier part of the hearing. So, I'm hopeful
that you'll be able to just send me a stipulation. MR. MARINUZZI: THE COURT: you folks very much. We hope so. Thank you, Your Honor. All right. Thank
All right?
Is that it?
We're adjourned.
(Whereupon these proceedings concluded at 12:46 PM)
212-267-6868
516-608-2400
Page 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
I N D E X
RULINGS Page Line Motion to compensate Fried Frank approved Motion to extend deadline to assume or reject nonresidential real property leases approved Motion by Best Western to shorten time period to assume or reject denied 37 6 29 1 25 10
212-267-6868
516-608-2400
Page 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Date: November 11, 2010 Veritext 200 Old Country Road Suite 580 Mineola, NY 11501 I, Ellen S. Kolman, certify that the foregoing transcript is a true and accurate record of the proceedings. C E R T I F I C A T I O N
Ellen Kolman
ELLEN S. KOLMAN
______________________________________
Digitally signed by Ellen Kolman DN: cn=Ellen Kolman, o, ou, email=digital1@veritext.com, c=US Date: 2010.11.11 15:25:59 -05'00'
212-267-6868
516-608-2400

10000004073

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

10000004073

Загружено:

Авторское право:

Доступные форматы

Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et al.,

November 10, 2010 10:16 AM

B E F O R E: HON. SHELLEY C. CHAPMAN U.S. BANKRUPTCY JUDGE

VERITEXT REPORTING COMPANY www.veritext.com

VERITEXT REPORTING COMPANY www.veritext.com

Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: PAUL BASTA, ESQ.

ANUP SATHY, P.C., ESQ. MARC J. CARMEL, ESQ.

DANIEL T. DONOVAN, ESQ.

VERITEXT REPORTING COMPANY www.veritext.com

VERITEXT REPORTING COMPANY www.veritext.com

JOHN D. PENN, ESQ.

MICHAEL G. HELMS, ESQ.

ADAM L. SHIFF, ESQ. DANIEL A. FLIMAN, ESQ.

TODD C. MEYERS, ESQ.

Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: LEE S. ATTANASIO, ESQ.

ALAN W. KORNBERG, ESQ. LAUREN SHUMEDJA, ESQ. ANDREW J. EHRLICH, ESQ.

DAVID NEFF, ESQ. (TELEPHONICALLY)

INNKEEPERS USA TRUST, et. al.

UNIDENTIFIED SPEAKER: THE COURT:

They still haven't recovered from the last

Sathy, let's find out who's on the phone.

appearances of the folks on the phone please?

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

We'll come back in ten minutes.

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

Paul Basta and Dan Donovan my partners.

Your Honor, we have

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

All right, sir.

You're connected into my courtroom.

And what we're going to do is I'm going to allow Mr.

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

I'd like to make --

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

debtors in these Chapter 11 proceedings.

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

clerk that you have gotten copies of the responses.

You can disconnect now, otherwise you're

welcome to stay on the line and listen to the hearing which

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

I guess I'll hang up. Have a good day. Bye.

All right. Thank you.

I'm think that would be great and if we

I'll meet you in the back room.

Thank you, Your Honor. All right. Thank everyone in the

for the debtors for seventy-five days that is to approximately

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

Mr. Basta will address the Fried, Frank motion,

anything with respect to exclusivity? MR. BIENENSTOCK:

Yes, Your Honor.

VERITEXT REPORTING COMPANY www.veritext.com

INNKEEPERS USA TRUST, et. al.

I believe the discussion and the agreement was by